Oil prices above $75/bbl as Israel-Iran conflict intensifies

New Delhi: Crude oil prices edged higher early Monday as tensions escalated between Israel and Iran, with both countries targeting each other's key energy infrastructure.

Over the weekend, Israel launched airstrikes on several oil and gas fields in Iran, including South Pars, one of the world’s largest natural gas reserves. Despite the intensity of the attacks, reports indicated that there has been no immediate disruption to energy supplies.

Meanwhile, Iranian missile strikes on northern Israel reportedly caused localized damage to pipelines and transmission lines in the Bazan oil refinery complex near Haifa. While refining operations continue, other functions at the facility have been suspended, according to reports.

At 0755am, IST, the August contract of Brent crude on the Intercontinental Exchange was trading at $75.14 per barrel, up 1.24% from previous close. Immediately after Israel attacked Iran, oil prices shot up on Friday. Brent Crude, the global benchmark, had surged 8% to $74 per barrel.

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Traders remain wary of further escalation, particularly any threat to the Strait of Hormuz—a critical chokepoint through which nearly 20% of the world’s oil supply is transported.

S&P Global Commodity Insights said Israel’s surprise airstrikes on Iranian nuclear sites have jolted global energy markets, sending oil prices higher and fuelling fears of broader regional instability. While the conflict is driving up oil and gas prices in the short term, S&P noted that sustained pressure is unlikely unless crude exports are directly impacted.

“If Iranian crude exports are disrupted, Chinese refiners—the primary buyers of Iranian oil—would be forced to seek alternatives from other Middle Eastern suppliers and Russia,” said Richard Joswick, head of near-term oil analysis at S&P Global. “This could also lift freight rates and tanker insurance premiums, narrow the Brent-Dubai spread, and hurt refining margins, especially in Asia.”

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According to the Platts OPEC Survey, Iran produced 3.25 million barrels per day (b/d) of crude in May. It also has around 2.2 million b/d of refining capacity and 600,000 b/d of condensate splitting capacity. However, crude exports slipped below 1.5 million b/d last month as floating storage levels rose amid rising geopolitical tensions.

India, which imports over 85% of its crude oil, does not purchase Iranian oil due to US sanctions. Nonetheless, any global supply disruption and price surge increases India’s import bill, putting pressure on the rupee and trade balance.

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JP Morgan recently projected that crude oil prices could surge to $120–130 per barrel if the conflict worsens.

“If prices climb to $120 per barrel, there will be pressure on the forex front and the trade balance due to a higher import bill. However, inflation may not be immediately impacted, as domestic fuel prices are unlikely to be raised in the short term, having remained static even during earlier price dips,” Madan Sabnavis, chief economist at Bank of Baroda, had told Mint earlier.