Middle-East Conflict Drives Brent Crude 7% Rise, Risks Global Economic Shock

The recent escalation of conflict between Israel and Iran has caused a significant rise in crude oil prices, with Brent crude surging 7% over two days and continuing to climb amid fears of supply disruptions, particularly concerning the strategic Strait of Hormuz. This waterway is crucial as about 20% of global oil and LNG passes through it, and Iran's threats to close the strait have raised concerns over global energy security and inflationary pressures. Economists warn that the conflict could slow global growth, increase inflation, and constrain central bank policies, though stock markets have shown some resilience. India faces heightened risks due to its reliance on the Strait of Hormuz for nearly two-thirds of its crude oil and half its LNG imports, which could lead to higher oil prices, increased shipping costs, and inflationary pressures at home. Indian Oil Marketing Companies are already experiencing material impacts on earnings from crude price volatility, while upstream companies might benefit slightly, although further price spikes could negatively affect OMCs and gas utilities due to rising LNG costs. Despite these challenges, analysts remain cautious, monitoring the situation closely, with the current crude price rebound still below average levels seen earlier in the fiscal year.