Why closure of Strait of Hormuz could double crude oil prices in India
If Iran shuts the strait for just 2 weeks, crude prices could soar to $150 a barrel in international markets, potentially plunging global economy into crisis
Iran and Israel continue to fire ballistic missiles and rockets at each other, significantly escalating tensions in the Middle East. In this scenario, global attention is focused on what Iran decides to do about the Strait of Hormuz.
Often referred to as the “lifeline” or “artery” of global oil supply, the Strait of Hormuz facilitates the transport of nearly 20 per cent of the world’s crude oil consumption.
Iran could weaponise the Strait
Iran exercises control over the Strait of Hormuz. Global concern is mounting that the ongoing conflict in the Gulf may escalate further, threatening the artery that ensures the world's crude oil supply.
Petroleum expert Narendra Taneja warned: “There has always been a risk that Iran might use the Strait of Hormuz as a strategic weapon.” Recalling that about 20 per cent of the global crude oil supply passes through this route, he said Iran could disrupt the flow of oil tankers by placing explosives or blocking the channel with its vessels.
He also didn’t rule out the possibility of Iran attacking tankers from other nations.
Fear of oil shock
On Friday, June 13, following Israel’s strike on Iran’s nuclear and military installations, crude oil prices surged by 12 per cent, reaching $77 per barrel. Commodity experts believe if the conflict prolongs, prices may spike further.
According to Taneja, if Iran shuts the Strait of Hormuz for just two weeks, crude oil prices could soar to $150 per barrel in international markets, potentially plunging the global economy into crisis.
India imports around 80 per cent of its crude oil requirements. Per Taneja, India sources oil from Iraq, Kuwait, and Saudi Arabia, and natural gas (LNG) from Qatar — supplies that are all routed through the Strait of Hormuz. Hence, the strait is of great strategic importance for India as well.
Vital oil artery
The Strait of Hormuz is a narrow maritime channel situated between the Persian Gulf and the Gulf of Oman. It is the only sea route connecting the Persian Gulf to the Arabian Sea and is regarded as one of the world’s most crucial strategic chokepoints.
The strait ranges between 39 km and 70 km in width and stretches about 167 km in length. Iran lies to its north, while the UAE and Oman border it to the south. It is considered highly sensitive for international trade and energy supply.
French President Emmanuel Macron has also voiced concern over the implications of a war between Iran and Israel.
This article was originally published in The Federal Desh.
