Israel-Iran: Will Fuel Prices Rise in India?

Oil prices in India are set to witness a spike with the crisis between Israel and Iran deepening by the day. In such a situation, Tehran is threatening to close the Strait of Hormuz, crucial in the transportation of oil shipments across the world. It is world’s most vital oil transit chokepoint, with over 20 million barrels passing through it on a daily basis.

With tension between the two nations showing no signs of let up and Tehran increasing the threat of choking the Strait of Hormuzm, in retaliation to Israel’s offensive, various nations depending on the transit point for their oil needs are likely to face a crisis, set to reflect in the price of oil and oil products.

This threat would have a heavy impact on the oil prices in India as the country depends on the same Strait for 40 per cent of its oil needs. A major portion of the oil necessary for India has to pass through this route as it is imported from Iraq, Saudi, UAE, Kuwait and Qatar. Over 90 per cent of the fuel used by the country is imported from the international markets.

Once the Strait of Hormuz is closed, the transportation and insurance costs would increase exponentially as alternative routes have to be explored. Subsequently, the prices of petrol, diesel, LNG would skyrocket in the country.

It would also push the oil companies in the country into financial turmoil. However, Petroleum minister Hardeep Singh Puri assured that there would be no hurdle for the supply of petroleum required for India. The existing stocks would last for the next 74 days, he added.

Meanwhile, experts feel Iran can never close the Strait as 80 per cent of the oil produced in Tehran is imported by China, which would act as a deterrent for Iran.