The increasing tension between America and Iran at the international level has once again increased the concerns of the entire world. After the end of the ceasefire and the new sanctions on Iran, the prices of crude oil are rising rapidly. Many big market experts have warned that if this tension between the two countries continues for a long time, then India’s crude import basket can cross $ 75 per barrel. This means that the country’s import bill will become heavy and the general public may once again have to bear the brunt of inflation.
International market environment deteriorated due to restrictions
The situation worsened when America canceled the temporary exemption on the sale of crude oil to Iran and again imposed strict sanctions. The matter did not stop here, but military attacks were also carried out on more than 80 Iranian targets. After this, the attacks on crude and LNG tankers near the Strait of Hormuz have created great fear regarding the global supply chain. Due to this nervousness, Brent crude has jumped by about 6 percent to reach around $ 78 per barrel, while American crude (NYMEX WTI) is also trading above $ 74.
India has plan B ready
Amidst all these global concerns, the matter of relief is that this time India is in a much safer situation than before. According to Debopam Chaudhary, Chief Economist of Piramal Group, India has greatly diversified its strategy in purchasing crude oil. Now instead of depending only on the countries of the Middle East, we are also importing oil on a large scale from countries like America, Venezuela and Russia. Axis Direct’s commodity analyst Devaiya Gaglani also believes that even if there are problems in the Strait of Hormuz, India will not have to face any major supply crisis. Saudi Arabia has recently announced the biggest price cut for Asian markets in the last 20 years, which will reduce this blow to some extent.
Crude oil may become more expensive
Despite preparations, a big economic risk looms. According to experts, if this conflict continues for a long time, the price of Indian crude basket will jump from the current $68 per barrel to beyond $75. According to Anindya Banerjee, head of commodity research at Kotak Securities, the movement of tankers passing through the Strait of Hormuz is still 60 to 70 percent below pre-war levels. The market had reduced the price from $120 to $70 in the hope of the end of the war, but now it is moving back towards the same danger.
Common man’s pocket may get hit
Even though India does not directly buy oil from Iran and there is no shortage of supply, we will have to suffer the indirect loss of rising prices across the world. Devarsh Vakil, Prime Research Head, HDFC Securities, clarifies that India’s import bill will increase due to higher crude oil prices. Oil companies will have to spend more dollars for raw materials, which will put pressure on the rupee and the current account deficit may worsen. This will result in increasing inflation in the country. Motilal Oswal’s Commodity Analyst Manav Modi also said that natural gas prices are also going up due to attacks on LNG ships. In such a situation, the fuel prices in the domestic market may spoil the general budget in the coming days.
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