NEW DELHI: Indian refiners are bracing for a fresh spike in oil prices following the US-Israel attack on Iran, as they review alternative supply options in case the Strait of Hormuz is shut or energy facilities across the region come under attack.
Oil markets have already priced in part of the geopolitical risk, with warnings of an attack circulating for days. Benchmark Brent futures settled near $73 a barrel on Friday, almost $6 higher than at the start of February.
Industry executives said the scale and stated objectives of the latest US action appear far broader than last year’s flare-ups, raising the risk of a prolonged conflict. “The consequences this time could be far more significant,” one executive said, warning that sustained tensions could drive oil prices higher and keep them elevated for longer.
Indian consumers may be shielded in the short term. Retail fuel prices have been largely frozen for nearly three years, with refiners not regularly passing on changes in international benchmarks. However, higher crude prices would squeeze refining margins and widen India’s import bill, putting pressure on the current account deficit and the rupee.
India does not currently import oil from Iran, which ships most of its crude to China. But any attack on oil facilities in Iran or elsewhere in the Gulf could tighten supplies and lift prices even if the Strait remains open. The Strait of Hormuz is central to India’s energy security. About 40% of the country’s crude imports and 55% of its LNG supplies pass through the waterway.
Refiners are examining contingency plans, including loading cargoes from Saudi and UAE ports that bypass the Strait and placing additional orders with producers outside the Gulf, executives said.
