Oil prices climbed 2.8% after renewed US-Iran fighting raised fresh fears of disruption to shipping and crude exports through the Strait of Hormuz. According to latest reports, the escalation began when US forces struck an island in Hormuz, and Iran retaliated with attacks on the United Arab Emirates and Jordan, marking the first exchange of fire in about a month. Iran responded by launching ballistic missiles and drones at US military installations in Jordan, with the Jordanian Armed Forces intercepting and destroying eight missiles after they entered Jordanian airspace. The IRGC then confirmed targeting technical and maintenance infrastructure at two US bases in Jordan, warning that Iran would "forcefully respond" to every new US strike. This latest development comes as India's crude oil supply crisis has intensified with the United States and Venezuela announcing a historic 25-year energy accord that will significantly impact global oil markets.
Oil prices have climbed significantly with WTI front-month futures trading above $86, up 2.8% in the previous session, while Brent settled near $90 on Monday. This represents a notable increase from previous levels, with Brent crude futures climbing $1.08, or 1.23%, to $89.18 a barrel and US West Texas Intermediate crude at $84.32, up 92 cents, or 1.10% as reported by The Economic Times. India's choicest crude oil barrels — higher sulphur, denser and dirtier varieties — are being squeezed out of the market and are getting pricier. India's total crude oil imports in August averaged 4.7 million bpd, 6% lower than in July, with spot imports making up over 70% since the West Asian war began in February.
Indian refiners are being forced to adjust crude purchase patterns daily as spot imports make up over 70% since the West Asian war began. Bharat Petroleum (BPCL) is covered until September, and will pursue purchases for October deliveries now, said Ramakrishna Gupta, chief financial officer. The refiner has tested ship-to-ship (STS) transfer waters in West Asia, daring to send a tanker to the Gulf of Oman to pick up an Iraqi cargo, with the cargo crossing the Strait of Hormuz on another tanker before transferring to BPCL's vessel. Other refiners said they haven't tried such risky STS operations due to difficulty finding ships for the voyage.
As reported by Business Standard, Russian crude imports slumped by 700,000 bpd in August to 2.1 million bpd — down from a record 2.81 million bpd in July and 2.7 million bpd in June. This sent Russia's share of India's total crude oil imports to 44% so far this month, down from a record 56% in July — the highest-ever share of supplies by one country in over a decade. India imported a record 2.78 million bpd of Russian crude in July, or 56% of its total crude imports. The dependence surge followed the Iranian blockade of the Strait of Hormuz, which halved West Asian volumes.
The latest escalation has severely impacted shipping through the Strait of Hormuz, with visible commodity-vessel traffic dropping to around five ships per day over the weekend. According to The Economic Times, Centcom gave an update on its blockade of Iranian ports, with 83 commercial vessels redirected, three disabled, and two boarded as of August 30. UK Maritime Trade Operations issued a warning that another tanker transiting through the Strait had been struck by an unknown projectile. Even so, vessels transiting the waterway face a constant threat of attack, with a tanker reported being struck by three unidentified projectiles while moving outbound through Hormuz near Oman. The combination of low traffic, attacks on shipping, the US blockade, and renewed attempts from the IRGC to mine the Strait suggests the geopolitical premium isn't going anywhere anytime soon.
