Oil costs have taken a breather after a pointy 21.74 per cent surge in Brent futures this month (June 2025), pushed by geopolitical tensions within the Center East. Whereas Brent is at present buying and selling at $75.6 per barrel, the opportunity of costs testing $120 can’t be dominated out if the Iran-Israel battle escalates.
For India, a internet oil importer, rising crude costs pose important dangers to the economic system, foreign money, and markets. Listed below are three key dangers India ought to watch as tensions simmer within the Center East, together with insights into whether or not $120/barrel is a sensible situation.
Is $120/barrel a chance?
Though costs have soared just lately, as per Sugandha Sachdeva, Founding father of SSWealth Avenue, it’s primarily as a result of fears round battle slightly than precise provide points. In truth, Iran’s crude exports have risen by 44 per cent since mid-June, regardless of current sanctions.
An OPEC+ surplus capability of 5 million barrels a day is accessible, and any scarcity from Iranian provides can simply be dealt with. Subsequently, the market is properly buffered for now until we’re a considerable provide disruption like a blockade of the Strait of Hormuz, she famous.
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But when Brent had been to interrupt into and maintain a value above the vary of $78 to $80, speculative shopping for may set in that will push costs to $100 and even above. Underneath the worst-case situation, actually, with a full-scale battle being waged or a blockade enforced, value ranges may certainly see an upward spike past $120 to $125 per barrel.
Sachdeva explains: “The charts counsel one thing huge is brewing. Nobody desires struggle, and hopefully it gained’t escalate – however value motion signifies a possible rally. There might be short-lived corrections, however we’re prone to see upward motion until peace talks take maintain.”
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The Strait of Hormuz – Why does it matter and what it means for India?
Roughly 20 per cent of the world’s oil passes by way of the Strait of Hormuz. If this significant route had been blocked, it might disrupt oil and fuel exports from main producers like Iran, Iraq, Saudi Arabia, and others. Whereas it’s unlikely Iran would block the Strait fully (given its personal reliance on oil revenues), even a partial disruption may trigger a significant spike in world power costs.
As a significant oil importer, India is especially uncovered to rising crude costs. Listed below are three key dangers the nation ought to keep watch over:
1. Rupee weak spot and inflation dangers
A sustained rise in oil costs will push up India’s import invoice, placing strain on the rupee and fuelling inflation. In the mean time, inflation is at a six-year low, helped by a beneficial monsoon – but when oil strikes previous $95 per barrel, value pressures may return rapidly.
A weaker rupee means dearer imports throughout the board – not simply oil – which may damage financial stability, widen the present account deficit, and drive up shopper costs.
2. Disruption through the Strait of Hormuz
India sources a lot of its oil from Iraq, Saudi Arabia, the UAE, and Russia – a lot of whom export by way of the Strait of Hormuz. Regardless that India’s dependence on Iranian oil is minimal (simply 0.2 per cent), a blockade may create critical provide chain issues.
This might hit gas availability and improve prices throughout a number of sectors, together with paints, cement, and transport. India’s LNG (liquefied pure fuel) imports – particularly from Qatar – is also affected.
3. A broader geopolitical escalation
If world powers just like the US, Russia, or China become involved, the battle may spiral into a bigger regional disaster. Tensions have already risen with unpredictable rhetoric from US President Donald Trump, together with threats to strike Iranian nuclear websites.
If that occurs, international buyers could pull cash out of Indian markets extra aggressively, hurting equities and including to foreign money volatility. In line with Sachdeva, the depreciation of the Indian rupee is pushed by two key elements — increased crude oil costs and rising geopolitical dangers. The latter typically triggers international institutional investor (FII) outflows from Indian markets, additional weakening the rupee.
At present, FIIs are on observe to exit June as internet sellers of Indian equities within the money market, following three straight months as internet purchasers. As of June 18, FIIs’ internet outflows stand at Rs 4,978.1 crore for the month, in stark distinction with DIIs’ inflows price Rs 59,230.2 crore, based on provisional change information.
Silver Linings: What if costs fall?
It’s not all doom and gloom. If diplomatic talks make progress and tensions ease, oil costs may retreat to round $70 per barrel – taking the warmth off India’s economic system. India depends on imports to satisfy about four-fifths of its oil demand.
Decrease crude costs would assist strengthen the rupee, ease inflation issues, and slim the commerce deficit – all of which might be optimistic for markets and progress.
Is that this a shopping for alternative in oil?
From an investor perspective, crude oil may supply upside if Brent stays above $80. Sachdeva believes the development remains to be optimistic – with any minor corrections prone to be momentary. “This might be a shopping for alternative. As of now, we haven’t seen main disruptions in Iran’s exports. And even when we do, Saudi Arabia has the capability to step in. The actual spike would come provided that the Strait of Hormuz is blocked,” she stated.
She additionally notes that US oil inventories are 10 per cent under their five-year seasonal common – an indication that underlying demand is stronger than it seems, notably heading into the summer time journey season.
Vitality diversification as a strategic power for India
India has tried to minimise its dependence on any single provider: it imports oil from Russia, Iraq, the US, and the UAE. Such diversification of sources vanishes within the sudden incidence of provide shocks. In its ongoing commerce talks with the US, India may focus on limiting oil imports, which might improve India’s power safety and cut back short-term volatility.
