Global Oil Prices Rise Amid US Insurance Cover Announcement

Key Figures:

• $82.77: High price of the April contract for Brent crude on the Intercontinental Exchange
• $82.08: Price of the April contract for Brent crude at 7:40 a.m.
• 1%: Rise in global oil prices in early trading on Wednesday
• 15%: Jump in global oil prices over the past two sessions
• $75.05: Price of the April contract of West Texas Intermediate on NYMEX
• $1.3 billion: Daily value of oil and LNG passing through the Strait of Hormuz
• ₹16,000 crore: Increase in India's import bill for every $1 rise in oil prices per barrel

US Announces Insurance Cover for Ships in West Asia

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

On Wednesday, President Donald Trump announced that the US would provide insurance cover for ships in West Asia at a "reasonable price" amid the ongoing conflict. The US Navy would escort tankers through the Strait of Hormuz if necessary. This move led to a modest rise in global oil prices, with the April contract for Brent crude rising over 1% to a high of $82.77 per barrel.

Impact on Global Oil Supply Chains

About half of India's crude oil imports pass through the Persian Gulf and the Strait of Hormuz, making any disruption a major concern. The Strait remains technically open, but transit has effectively paused due to security risks and prohibitive insurance costs. Around 20% of global oil and LNG passes through the Strait of Hormuz each day, worth more than $1.3 billion.

India's Vulnerability to Oil Price Rise

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

A sustained rise in oil prices would increase India's import bill, widen the current account deficit, and drive inflation. An increase of $1 per barrel over a year adds roughly ₹16,000 crore to India's import bill. Nigel Green, CEO of deVere Group, said that a sustained move toward $90 Brent fundamentally alters the inflation outlook and forces a repricing of interest rate expectations.

India's Stock Levels and Monitoring

The Centre is closely monitoring fuel and oil stocks, as the disruption in the Strait of Hormuz unsettles global oil supply chains. State-run refiners have crude stocks sufficient for about 25 days, plus petrol and diesel for another 25 days. India also has around 25 days of cooking gas and up to 21 days of liquefied natural gas stocks. The Ministry of Petroleum and Natural Gas has established a 24×7 control room to continuously monitor supply and stock levels across the country.