Global crude oil prices climbed to nearly $120 per barrel early on Monday, the highest level in about four years, before easing to $103, as the expanding US-Israel war with Iran heightened fears of supply disruptions through the Strait of Hormuz, a key route for crude shipments to major importers, including India.
Even as the domestic stock market turned volatile, with benchmarks Sensex and Nifty slipping over 3% during intra-day trade before recovering to close 1.7% down, government sources said India has no immediate plans to raise retail prices of petrol and diesel, citing comfortable fuel stocks.
Wall Street’s main indexes also took a hit, dropping over 1%, exacerbating inflation fears as the hostilities entered their 10th day. International benchmark Brent crude briefly touched $119.50 per barrel, marking a 45-month high, while US West Texas Intermediate (WTI) also climbed to $119.48 during intraday trading.
Brent futures up $8.77
Brent futures were up $8.77, or 9.46%, at $101.46/barrel during the day, while WTI futures gained $7.92, or 8.71%, to $98.82. With crude prices touching $120/barrel, the International Energy Agency and G7 countries on Monday examined the possibility of releasing nearly 400 million barrels of crude oil from their strategic reserves to ease supply concerns.
However, India is unlikely to participate in such a coordinated release, according to government sources. Oil prices have risen sharply since the US and Israel launched strikes on Iran on February 28, with Brent gaining as much as 66% and WTI about 77% compared with levels before the conflict.
The surge is driven by mounting concerns that the conflict could disrupt oil shipments through the Strait of Hormuz, a critical maritime corridor for global energy trade. The spike in prices has also raised concerns for India, one of the world’s largest crude importers. West Asia supplies more than half of India’s crude imports.
Out of the country’s daily consumption of about 5.5-5.6 million barrels, roughly 1.5-2 million barrels normally transit through the Strait of Hormuz. Concerns over supply have intensified as several West Asian producers begin curbing output due to logistical disruptions and storage constraints. Iraq, Kuwait and the UAE have started reducing oil production as the effective closure of Hormuz disrupts global supply flows.
While Saudi Arabia and the UAE can partially bypass the strait through pipelines, other exporters including Iran, Iraq, Kuwait and Qatar depend heavily on Hormuz for most of their oil exports, amplifying fears of a prolonged supply squeeze.
Indian refiners pump supply from alternate sources
Amid the disruption, Indian refiners have begun increasing crude sourcing from alternative regions, including Russia, Africa and South America to ensure supply continuity. Officials said that with additional crude arriving from these regions, India remains “comfortably positioned” in terms of crude oil stocks.
Indian refiners have also stepped up purchases of Russian crude after the US granted a 30-day waiver allowing cargoes already loaded on vessels before March 5 to be delivered to India. Under the waiver, refiners can procure shipments from both sanctioned and non-sanctioned Russian entities, provided the oil had already been loaded on vessels before the specified deadline.
So far, about 10 million barrels of Russian crude have been discharged this month, while another 23 million barrels are projected to unload in the coming weeks, FE reported on March 8. Analysts say sustained high oil prices could have wider macroeconomic implications.
According to Ankita Pathak, head – global investments at Ionic Asset, “The uptick in oil prices above $100/bbl could be detrimental for global markets in the near term. Persistently elevated oil prices may push up inflation expectations and reduce the probability of further rate cuts.”
She added that if crude prices remain elevated, India’s current account deficit could widen to around 2.4-2.6%, while consumer inflation could rise to 5.5-5.7%, significantly above the Reserve Bank of India’s estimate of 4.1% for the first half of FY27.
“Such sharp spikes in oil have historically corrected in subsequent months, with markets often rebounding strongly once signs of de-escalation emerge,” Pathak said. During the last such coordinated intervention in global oil markets — during the Covid-19 pandemic — India had released crude from its strategic reserves along with other major economies to help ease supply constraints and moderate global prices.