Oil prices jump 2% after US strikes Iran, India monitors evolving situation

International crude oil prices increased over 2% on Monday morning due heightened concerns of global supply disruption after the US on Saturday attacked three nuclear facilities in Iran.

The development marked a major escalation in the ongoing Israel-Iran conflict. Amid the escalating tension, the Indian government has said it is monitoring the situation and the country has adequate supplies and continues to receive oil from several routes.

Around 7:45 am, the August contract of Brent on the West Texas Intermediate was trading at $78.66 per barrel, higher by 2.14% from its previous close. The August contract of West Texas Intermediate on the NYMEX rose 2.06% to $75.36 a bbl.

Following the direct participation of the US in the West Asian conflict, the likelihood of Iran blocking the Strait of Hormuz— a narrow chokepoint through which nearly 20% of global crude oil flows— has gained momentum.

Also read: US attack on Iranian nuclear sites roils oil market, India braces for possible price surge

Hormuz threat

According to the Iranian state media, the Iranian parliament has already voted to block the Hormuz Strait in retaliation. However, the proposal needs the approval of the country's Supreme National Security Council.

Iran currently produces about 3.3 million barrels per day (mbd) of crude oil, exporting 1.8-2.0 mbd. While Iranian oil facilities have reportedly been hit, the extent of damage remains unclear. However, the larger risk lies in a broader regional conflict that could pull in other major oil producers in the Gulf.

However, any move to block the strait may put significant cost pressures on India, even though it no longer buys oil directly from Iran due to US sanctions. Crude supplies from Iraq, Saudi Arabia, Kuwait, and the United Arab Emirates, all routed via the Strait of Hormuz, account for nearly half of India’s total imports. About 60% of its natural gas imports also pass through this critical passage.

Given the major ramifications these events could have on the energy market and oil importers like India, the Indian government has been keeping a close watch on the conflict in West Asia and the union petroleum minister Hardeep Singh Puri has said that as the country has diversified its supplies in the past few years, a large volume of its supplies do not come through the Strait of Hormuz. 

Also read: ‘Difficult to speculate...’: What Hardeep Singh Puri said on oil prices, supply amid Hormuz Strait closure tensions

In a tweet, he also assured that the country has adequate supplies of crude to meet the domestic demand.

Taking to social media platform 'X' late on Monday evening, the minister said: "We have been closely monitoring the evolving geopolitical situation in the Middle East since the past two weeks. Under the leadership of PM Narendra Modi, we have diversified our supplies in the past few years and a large volume of our supplies do not come through the Strait of Hormuz now. Our Oil Marketing Companies have supplies of several weeks and continue to receive energy supplies from several routes. We will take all necessary steps to ensure stability of supplies of fuel to our citizens."

Also read: How Israel-Iran conflict is likely to inflate global oil prices?