Oil Prices Surge to Near $120 Amid Indication of Continued Hormuz Strait Blockade

Global Oil Prices Continue to Rise Amid US-Iran Tensions

New Delhi: The price of global oil continued its upward trend on Thursday, following a significant 7% jump in the previous session, due to concerns over prolonged supply disruptions stemming from the US's stance on Iran. Brent crude traded near $120 a barrel, after US President Donald Trump's comments that Washington would not lift the ongoing naval blockade of the Strait of Hormuz until a nuclear deal is signed with Iran.

The June contract of Brent on the Intercontinental Exchange was trading at $119.80 per barrel early Tuesday, representing a 1.50% increase from its previous close. In contrast, the June contract of West Texas Intermediate on the Nymex rose 0.36% to $107.26 a barrel. The Strait of Hormuz, a critical waterway for global oil and gas trade, has been crippled by the US blockade, with the strait accounting for approximately 20% of global energy trade.

The stalemate over peace talks and the continued blockade of the Strait of Hormuz have significant implications for India, which imports around 90% of its annual oil consumption. Rating agency Icra has projected that raw material cost pressures and supply constraints will negatively impact the profitability of key downstream sectors, including oil marketing, fertiliser, chemical, and city gas distribution, in the fiscal year 2027.

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The stability of retail prices for regular petrol and diesel has resulted in a hit to the profitability of oil marketing companies, despite the recent reduction in excise duty. According to Icra, the marketing margins on petrol and diesel are estimated to be negative ₹14/litre and ₹18/litre, respectively, at crude prices of $120-125/barrel and long-term averages of crack spreads.