The war situation in the Middle East is escalating once again, directly impacting crude oil prices. On Thursday, Brent crude crossed the $105 mark, touching $105.2 per barrel. Similarly, WTI crude reached $100.4; both saw a price increase of $4 in a single day. This is the first time since May that crude oil prices have reached these levels. Experts attribute this surge to the conflict involving Iran, China’s massive oil purchases, and reduced oil production in Saudi Arabia. Amidst these developments, there is a looming possibility of an impending energy crisis, with concerns that Brent crude prices could soon climb to $120. Experts have stated that if the current situation in the Middle East persists, another energy crisis will be unavoidable. Iran has threatened to retaliate if the US continues its attacks. US President Donald Trump has indicated that the conflict will only conclude after the November midterm elections; consequently, there is little hope for relief regarding crude oil prices before November. This situation is expected to directly impact the global market. Indian oil companies are currently under pressure due to the rising prices.
Despite the hike in crude oil prices in the international market, domestic fuel prices have remained unchanged, causing Indian oil retailers to incur losses of ₹5 per litre on petrol and ₹23 per litre on diesel. Experts have warned that rising oil prices will not only increase the country’s import bill but also exacerbate the inflation situation. Market analysts have noted that crude oil prices are currently rising due to fears of supply chain disruptions in the Gulf amidst the ravages of war. As the world’s third-largest oil importer, India sources over 88% of its oil requirements from abroad; consequently, it will bear the brunt of the surge in crude oil prices. Between April and July of this year, the country’s oil import bill rose by more than 56% to reach $63.4 billion, up from $40.5 billion during the same period last year, even though the volume of imported oil remained steady at 81 million tonnes. If geopolitical issues worsen, crude oil prices will rise further. Profit margins in oil-dependent sectors—such as aviation, paints, tyres, chemicals, logistics, and FMCG—will shrink. Inflationary pressures will mount. Meanwhile, the likelihood of the RBI cutting interest rates will diminish; the central bank may keep interest rates unchanged in the upcoming review meeting.
