Israel-Iran tensions threaten to send oil, LNG prices soaring, experts warn of volatility in Indian markets
Strait of Hormuz is a narrow marine corridor situated between Oman and Iran and spans approximately 40 km at its most constricted section, providing 2 km of navigable waterways for vessels entering and exiting. India imports 85% of its crude oil requirements from Saudi Arabia, Iraq, and the UAE and LNG from Qatar.
This crucial passageway is the primary route for the exportation of crude oil, facilitating the daily transport of 6.3 million barrels from Saudi Arabia, along with significant volumes from the UAE, Kuwait, Qatar, Iraq (3.3 million bpd), and Iran (1.3 million bpd). While the oil imports can be redirected to the Red Sea route in case of disruptions, the experts were mainly worried about the LNG imports, which come primarily through the Strait of Hormuz and don't have many alternative routes.
Motilal Oswal Financial Services “anticipate materially higher crude oil prices, refining margins, and spot LNG prices" in case the Strait of Hormuz is blocked. "While investors focus on oil, we believe that spot LNG prices will witness even sharper escalation if the Strait of Hormuz is closed due to the absence of alternative routes," it said.
The crude oil prices, which are currently hovering at the level of $90 per barrel can suddenly shoot up in case the Iran-Israel tensions blow out of control. The experts sounded optimistic as the de-escalation steps are underway, but the situation is expected to remain volatile for the next few days.
Hardik Shah, Director, of CareEdge Ratings thinks India has some cushion against a sudden rise in crude oil prices as New Delhi still has a decent supply of Russian oil in its total imports. "However, India still has a decent share of the supply of Russian crude which comprises 30 percent
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