Oil, war, and the Hormuz gambit: Why the 2025 standoff won't mirror the 2022 shock!
It was Friday the 13th. A day already infamous for bad luck saw missiles rain over Tehran that lit up the sky with fire and fear, turning superstition into stark reality. In homes, offices, and trading floors, hearts raced as the tremors of a crisis rippled through global oil markets. Brent crude did not hesitate – it surged 7% overnight, hitting USD75 per barrel, fuelled by fears that the Middle East, the beating heart of global oil, might
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Economic Times
2 hours ago
- Economic Times
Oil markets hold firm amid West Asia tensions
Oil markets initially reacted with jitters but stabilized as traders assessed that escalating tensions in West Asia are unlikely to disrupt supplies, especially with a low probability of Iran blocking the Strait of Hormuz. Despite the US joining the conflict and Iran's parliament considering closing the strait, analysts believe retaliation is limited. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Contrary to fears, oil markets remained calm on Monday after an initial bout of jitters, as traders bet that rising tensions in West Asia are unlikely to disrupt supplies, particularly given the low risk of Iran blocking the vital Strait of Hormuz Brent crude held steady at around $77.50 a barrel by Monday evening, roughly the same as Friday's level, but higher from about $69 a barrel prior to Israel's June 13 attack on the US joined the conflict over the weekend, fears of a wider regional war escalated, an industry executive said. "But it also became clearer that Iran would pay a heavy price if it tried to escalate the conflict or block oil trade, making such a move less likely," the executive Strait of Hormuz, a narrow channel between Oman and Iran, handles roughly 30% of global oil trade and 20% of LNG shipments. About 40% of India's crude imports and 54% of its LNG supply move through this route. Following the US strike on Sunday, the Iranian parliament approved a measure to close the strait. The Iranian top leadership will have to take a final call on this of economic sanctions, Israeli strikes on Iran and its proxies such as Hamas and Hezbollah, and the waning influence of Russia in the Middle East have limited Tehran's options for retaliation, industry executives addition, the US can draw from its large Strategic Petroleum Reserve (SPR) if needed, as it did after the outbreak of the Ukraine war. The US is now the world's largest crude producer, pumping roughly 13 million barrels per day - far ahead of Saudi Arabia and Russia, which each produce about 9 million barrels per Saudi Arabia and its OPEC+ allies have been adding crude supply since May, at a time when rising global uncertainties and a shift to electric vehicles in China have shrunk oil demand growth, putting downward pressure on have warned, however, that prices could rise sharply if the conflict threatens to curtail Iranian exports or disrupt wider regional supplies.
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Business Standard
3 hours ago
- Business Standard
West Asia conflict keeps mkts on edge; Indices rebound as oil fears ease
Indian equities fell over 1 per cent on Monday amid fears that escalating tensions between the US and Iran could disrupt global oil supplies. But markets pared half their losses later in the day as Brent crude retreated from a five-month high, easing concerns about a potential supply shock. The Sensex dropped nearly 931 points (1.1 per cent) intraday before closing at 81,897, down 511 points (0.6 per cent). The Nifty settled at 24,972, declining 140 points (0.6 per cent). Foreign portfolio investors (FPIs) were net sellers to the tune of ₹1,874 crore, while domestic institutions provided buying support worth ₹5,592 crore. Brent crude surged to $77 per barrel — its highest level in five months — after the US launched strikes on Iran's nuclear facilities over the weekend, stoking fears of a prolonged conflict. Prices later eased to $76 as Iran showed no immediate signs of disrupting shipments through the Strait of Hormuz, a critical chokepoint for a fifth of the world's oil supply. Any supply disruption in the region could send oil prices soaring, raising stagflation risks — a toxic mix of sluggish growth and high inflation. For India, which imports most of its crude, this could widen the fiscal deficit and complicate the Reserve Bank of India's efforts to balance inflation control with growth support. 'We do not expect the escalation in the conflict to lead to a prolonged disruption of oil supplies in a way that could imperil global growth or cause significant challenges for central banks. As such, we believe that near-term downside in stocks could represent an opportunity for investors who are underallocated to equities to build a position,' said UBS in a note. UR Bhat, cofounder of Alphaniti Fintech, said the closure of the Strait of Hormuz is unlikely, as Iran's exports and imports would be affected. 'Iran is already crippled. The economic situation may worsen if they take such a step. Iran may continue to threaten to close the Strait of Hormuz, but it may not take such a drastic step. However, the bigger threat is Iran attacking US military assets, which would escalate tensions,' said Bhat. More than two-thirds of Sensex stocks declined. HDFC Bank, which fell 0.9 per cent, was the biggest contributor to the Sensex decline, followed by Infosys, which dropped 2.3 per cent. The market breadth was weak, with 2,273 stocks declining and 1,788 advancing. Analysts said a rise in gas prices would impact gas-based power generation as well as fertiliser and gas-importing firms such as Petronet LNG. 'While these external risks are building, India's robust foreign exchange reserves should cushion any significant impact on the external accounts,' Garima Kapoor, economist at Elara Capital, wrote in a note on Monday. A recent directive from the Ministry of Petroleum and Natural Gas suggests that state-run oil-marketing companies (OMCs) have enough inventories to last several weeks. India sources about 35 per cent of its crude oil and 42 per cent of its liquefied natural gas (LNG) through the Strait of Hormuz, making any prolonged disruption a major concern, according to Yes Securities. 'The immediate risk lies in shipment delays and increased freight charges.' However, India's diversified sourcing strategy is providing a cushion, analysts at the firm said. A prolonged supply squeeze could push India to rely more on costly spot LNG purchases, pressuring margins at importers like Petronet LNG, which depends heavily on long-term contracts from Qatar, Yes Securities' analyst Harshraj Aggarwal said. Still, India has built significant buffers. 'Strategic crude reserves cover around 9–10 days of imports, while refiners are increasingly flexible with feedstock,' Aggarwal said. He, however, added that static retail fuel prices and rising input costs were squeezing margins for OMCs like BPCL, IOCL, and HPCL. One of the impacts of any disruption in the Hormuz Strait could be on Di-ammonia phosphate supplies from Saudi Arabia, which recently became one of India's major DAP import sources, experts said. Experts warned that ammonia imports from Iraq, Kuwait, Bahrain, and Saudi Arabia could also be affected if transport through the strait is disrupted. Ammonia is a crucial raw material for producing DAP. India consumes about 10–11 million tonnes of DAP annually, with nearly half of that imported. Around 20 per cent of India's DAP imports now come from Saudi Arabia, which previously were sourced from China.
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Business Standard
4 hours ago
- Business Standard
Global equities rise as oil prices dip, markets downplay Iran conflict
Global equity markets advanced on Monday even as oil prices fell but still traded near multi-month highs as markets shrugged off the effects of the US attacks on Iranian nuclear sites in support of an Israeli military campaign. Wall Street's main indexes were all trading higher, with 9 out of 11 of the benchmark S&P 500 subsectors advancing. Energy equities were the biggest losers on the session. The Dow Jones Industrial Average rose 0.17 per cent to 42,279.55, the S&P 500 rose 0.48 per cent to 5,996.40 and the Nasdaq Composite rose 0.61 per cent to 19,565.74. European shares were down 0.2 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.66 per cent overnight. MSCI's gauge of stocks across the globe rose 0.28 per cent. Israel bombed Evin prison in northern Tehran on Monday, a potent symbol of Iran's governing system, and Revolutionary Guard command centers responsible for internal security in the Tehran area. Iran repeated earlier threats to retaliate against the United States. Its parliament approved the closure of the Strait of Hormuz, a major shipping lane in the global oil trade. "The market being higher signals a risk-on sentiment, which is somewhat surprising considering that we had a series of very volatile events over the weekend with US participation in the (Iran) bombing efforts with Israel," said Andrew Wells, chief investment officer at SanJac Alpha in Houston. "The lesson we take from this is that these headline events are having less and less effect on the market since tariffs went on - the so-called Liberation Day - which was the big volatile event." Brent crude futures fell 0.83 per cent to $76.37 a barrel. US West Texas Intermediate crude fell 0.88 per cent to $73.14. The Brent and WTI crude benchmarks touched five-month highs of $81.40 and $78.40, respectively. The Strait of Hormuz is only about 33 km (21 miles) wide at its narrowest point and around a quarter of global oil trade and 20 per cent of liquefied natural gas supplies pass through it. Federal Reserve Vice Chair for Supervision Michelle Bowman said on Monday the time to cut interest rates appeared imminent as she was increasingly worried about labor market risks and was less concerned that high import taxes would cause an ongoing inflation problem. The dollar strengthened 0.41 per cent to 146.68 against the Japanese yen and weakened 0.39 per cent to 0.814 against the Swiss franc. The euro was up 0.09 per cent at $1.1532, rebounding from earlier losses following Bowman's comments. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.19 per cent. Gold prices fell. Spot gold rose 0.56 per cent to $3,387.00 an ounce. US gold futures rose 0.5 per cent to $3,385.10 an ounce.
