Oil prices have reached their highest levels in more than six weeks, with Brent crude surging past $96 per barrel as the US-Iran conflict intensifies significantly. Brent crude futures rose $1.93, or 2% to $96 by 0011 GMT, marking their highest level since June 8, as reported by The Economic Times. US West Texas Intermediate crude gained $1.44, or 1.7%, to $88.27 after advancing nearly 3% on Wednesday. The US military carried out its 12th consecutive night of attacks on Iran hours after President Donald Trump threatened to destroy an Iranian bridge or power plant every time Iran fires at a ship in the Strait of Hormuz, escalating tensions around the crucial oil transit route. Iran's Revolutionary Guards said an oil tanker caught fire following an explosion while trying to pass through what they described as a mined route south of the Strait of Hormuz, with two other tankers forced to turn back, as reported by The Economic Times. Iran's Revolutionary Guards asserted that the Strait of Hormuz remains under their control and is 'completely closed' while US actions continue in the region, warning that no tanker would be allowed to enter or leave without coordination with Iran.
The Iran-aligned Houthis have opened a new front in the war by threatening to target vessels carrying Saudi oil in the Bab el-Mandeb Strait and announced a naval blockade of Saudi Arabia. The Houthis said they had carried out a military operation targeting two Saudi oil tankers, and maritime security reports said one of the vessels named by the group, the Saudi-flagged tanker Encelia, had been hit in the Red Sea. The Houthis said they had forced around 10 ships to retreat and return after warning vessels against sailing to Saudi ports, though Reuters could not immediately verify this account. This development represents a significant escalation from previous supply disruption fears, as the Houthis have now directly targeted Saudi crude movements through the Red Sea route. The Houthi threat has led tankers to divert which could further pressure the physical market and Saudi exports, contributing to push prices to the upside, said Frank Walbaum, market analyst at trading platform Naga.com. In response to the Houthi warnings, Asian refiners are seeking to ship crude oil from Saudi Arabia's Red Sea port of Yanbu through the Suez Canal and around Africa.
The Bab el-Mandeb Strait, located at the southern entrance to the Red Sea, has become an increasingly important route for Saudi Arabian crude exports as traffic through the Strait of Hormuz has fallen sharply again since a ceasefire between the United States and Iran collapsed earlier this month. The Red Sea has become an increasingly important export corridor for Saudi Arabia during the conflict, enabling the kingdom to reroute part of its oil exports through pipelines and avoid the Strait of Hormuz. Commercial shipping through the narrow waterway near Iran has fallen to its lowest level in three weeks, according to Live Mint. The core risk remains the Strait of Hormuz, through which roughly one-fifth of global oil and LNG flows typically pass. Renewed US-Iran hostilities have raised the probability of intermittent disruption, higher insurance costs, and reduced vessel willingness to transit the Gulf. Iran has continued to attack ships passing through Omani waters, and the number of ships passing through has fallen to single digits, compared with an average of 100 ships before the war. Market reports indicate that Bab el-Mandeb recently handled about 7.4 million bpd of petroleum flows, or nearly 7 per cent of global supply, making any credible disruption materially bullish for crude and refined products.
On the US supply side, crude stocks rose by 2 million barrels last week, the Energy Information Administration said, as refinery runs eased and crude exports dropped while imports rose. Analysts' in a Reuters poll had estimated a 1.1 million-barrel drawdown, contrasting with the actual increase in inventories. The Energy Information Administration data showed that US crude oil inventories increased by 2 million barrels last week, as refinery activity slowed, crude exports declined and imports increased, as reported by The Hindu BusinessLine. This data suggests that while geopolitical tensions are driving oil prices higher, domestic US supply conditions remain relatively stable, with the inventory build reflecting reduced refinery demand rather than supply constraints.
India, which relies on imports for more than 85% of its crude oil requirement, has also seen fuel prices revised upward multiple times over the past few months, according to NDTV Profit. Petrol prices on July 20 range from ₹102.12 per litre in Delhi to ₹115.73 in Hyderabad, while diesel prices vary from ₹95.20 per litre in Delhi to ₹103.82 in Hyderabad. Mumbai petrol costs ₹111.21 per litre and diesel ₹97.83 per litre, while Chennai petrol is priced at ₹108.01 per litre and diesel ₹99.66 per litre. Kolkata records the highest petrol price at ₹113.51 per litre and diesel ₹99.82 per litre, reflecting the impact of global crude price movements on domestic fuel costs. Global crude prices remain the biggest determinant of retail fuel prices in India, but they are influenced by central and state taxes, refining margins, freight and distribution costs, as well as rupee movements against the US dollar.
Domestic equity markets opened lower on Monday, tracking weak global cues and spike in crude oil prices amid escalating tensions in the Middle East kept investors cautious, as reported by ET Now. Sensex fell over 500 points or 0.7 per cent to an intraday low of 77,591 in early trade, while Nifty started the session 144 points or 0.6 per cent lower at 24,190.05. The market decline reflects investor concerns over the escalating Middle East conflict and its potential impact on global energy markets. September Brent oil futures were at $90.27, up by 2.46%, and September crude oil futures on WTI were at $83.64, up by 2.27% as of 9:28 am Monday, according to The Hindu BusinessLine. July crude oil futures were trading at ₹8131 on Multi Commodity Exchange (MCX) during the initial hour of trading on Monday against the previous close of ₹7945, up by 2.34%, while August futures were trading at ₹8097 against the previous close of ₹7910, up by 2.36%. In the domestic market, MCX crude oil futures (August) climbed 2.65% or ₹210 to an intraday high of ₹8,120 as of 10:29 am, as reported by Zee News. Market experts indicate that crude oil prices are likely to remain supported in the near term as escalating tensions in the Middle East and concerns over shipping disruptions through the Strait of Hormuz continue to underpin sentiment.
