Global Crude Prices Rise Amid Tensions in West Asia

Key Highlights

• Global crude benchmarks have increased by approximately 7% over the last three trading sessions.
• The escalation of tensions in West Asia, driven by a major US military buildup and warnings of potential military action against Iran, is fueling concerns of disruptions through the Strait of Hormuz.
• The narrow passage is critical for the transit of 40% of the world's crude oil and liquefied natural gas.

India's Vulnerability to Disruptions

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• India imports nearly 90% of its crude oil needs, with approximately 1.5-2 million barrels per day passing through the Strait of Hormuz.
• The majority of these imports come from Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates.
• A prolonged disruption along this route could tighten supplies, adding to domestic price pressures.

Contingency Plans

• The Indian government is assessing alternative supply channels and reviewing domestic reserves to ensure energy security.
• New Delhi is exploring two pipelines specifically built to bypass the Strait of Hormuz, as well as tapping into the global reserves and portfolios of Abu Dhabi National Oil Company (Adnoc) and Saudi Arabian Oil Co (Saudi Aramco).
• The plan involves sourcing crude that can be transported through infrastructure designed to avoid the Hormuz bottleneck, and leveraging the overseas storage and trading portfolios of major Gulf producers.