Iran-Israel Conflict Triggers Oil Price Surge, Puts Refiners and Shipping Lanes on Alert
A sharp escalation in the Iran–Israel conflict has rattled global energy markets, sending crude oil prices soaring and triggering concerns over the security of vital shipping routes. On June 13, as Israeli strikes reportedly targeted Iranian military and nuclear infrastructure, benchmark oil prices surged over 12%, with Brent crude hovering around $78 per barrel and WTI nearing $71. The sudden price spike has sparked fears of broader regional instability and potential disruptions to energy flows through the Strait of Hormuz.
Oil Price Surge
The crude price rally has renewed fears that ongoing military action in the Middle East could send oil soaring toward the $100 mark. Markets reacted swiftly as the possibility of retaliatory measures by Iran—including interference with maritime oil shipments—became more real. Traders are factoring in geopolitical premiums and bracing for volatility should the crisis deepen.
Threats to Shipping Lanes
The Strait of Hormuz, through which nearly one-fifth of the world’s oil supply passes daily, has emerged as a key vulnerability. Even partial disruptions in this chokepoint would send shockwaves through global supply chains, impacting prices and tanker availability. Shipping stocks, including Indian players like GE Shipping and Shipping Corporation of India, witnessed gains of up to 13% amid speculation of rising freight rates.
Pressure on Indian Refineries
India’s state-run oil refiners—IOC, BPCL, and HPCL—are bearing the brunt of higher crude prices, especially as retail fuel rates remain regulated ahead of key state elections. A $2 per barrel increase in Brent typically shrinks their marketing margins by nearly ₹1 per litre. This has already led to visible corrections in oil marketing company stocks, with analysts warning of further stress if crude prices stay elevated.
Economic and Macro Implications
India, which imports more than 80% of its crude oil requirements, is particularly vulnerable to such external shocks. A prolonged surge in oil prices would likely pressure the current account deficit, fan inflation, and complicate monetary policy for the Reserve Bank of India. However, experts suggest that India’s consumer inflation remains under manageable levels for now, providing limited fiscal breathing room.
Market Response and Outlook
While the immediate market reaction has been sharp, global oil supply continues to benefit from strong non-Middle East output, including from the US and Brazil. Strategic reserves, both national and multilateral, offer additional buffers. However, further strikes, retaliations, or threats to maritime traffic in the Gulf could disrupt this balance quickly. Any coordinated move by OPEC to adjust production may also influence short-term price trajectories.
As the geopolitical situation in the Middle East continues to evolve, India’s energy policy stakeholders and refiners are closely watching developments. The focus remains on maintaining supply security while limiting financial exposure in an increasingly unstable oil market. The next few days will be critical in shaping not just energy prices, but global economic sentiment.
