Oil prices rose for a third day on Tuesday as the widening US-Israeli conflict with Iran, effectively closing the Strait of Hormuz, heightened fears of supply disruptions from the key Middle East producing region.
“The price of oil has reached $81/bbl, and the world is certainly waiting for it to reach at least $200. The Strait of Hormuz is closed. Our heroes in the Islamic Revolutionary Guard Corps Navy and the Army will set fire to any ships that wish to pass through this strait,” Irani Brigadier General Ebrahim Jabari, the adviser to the IRGC commander, said on state television.
The Brent crude futures were hovering near $79/bbl, up $1.10, or 1.4%,. On Monday, the contract surged to $82.37, its highest since January 2025, though it pared some gains in late trade.
Meanwhile crude jumped 74 cents, or 1%, to $71.97 a barrel in US trade . In the previous session, the contract initially climbed to its highest since June 2025 before sliding back, still settling up 6.3%.
Analysts expect further price rise
Market analysts say that with no quick de-escalation in sight, the Strait of Hormuz effectively closed, Iran showing a willingness to target energy infrastructure in the region, and upside risks growing the longer the conflict drags on, upside risks remain.
Analysts expect oil prices to remain elevated over the coming days while markets focus on the impact of the escalating Middle East conflict.
Bernstein on Monday raised its 2026 Brent oil price assumption from $65 to $80 a barrel, but sees prices reaching $120- $150 in an extreme case of prolonged conflict.
On average, about one-fifth of global crude oil demand is carried by ships sailing through the Strait of Hormuz, along with tankers hauling diesel, gasoline and other fuels to major Asian markets, including China and India.
The Strait is also the conduit for about 20% of the world’s liquefied natural gas. Tankers and container ships are avoiding the waterway as insurers have cancelled coverage for vessels.
Effect on India
According to a Kpler report, about 50 per cent of India’s crude oil imports transit via the Strait of Hormuz, along with 85 per cent of the LPG supply. While a temporary workaround could be increasing crude oil imports from Russia, a long-term supply risk and oil price rise have serious implications for India’s fiscal deficit.
According to an IDFC First Bank report, a $10 per barrel increase in crude oil prices for the next 12 months would result in a 0.4 percentage point rise in India’s current account deficit-to-GDP. Further, as per the report, a 10 per cent increase in crude oil prices reduces real GDP growth by 15bps.