Oil prices have surged in global markets as escalating tensions between Iran and Israel threaten to disrupt critical oil transport routes, particularly the Strait of Hormuz, a vital chokepoint for global crude supplies. The geopolitical developments have injected fresh volatility into energy markets, with benchmark Brent crude futures jumping nearly 9% last Friday, June 13, 2025, to reach $75.65 per barrel, and touching an intraday high of $78.50 — the highest in nearly five months.

By Monday, prices moderated slightly to $74.98, after reports emerged that Iran is seeking mediation from regional players including Qatar, Oman, and Saudi Arabia, asking them to urge U.S. President Donald Trump to push for a ceasefire with Israel.

This volatile price movement reflects growing anxieties around a possible disruption in oil supplies due to military escalation and retaliatory threats from Tehran, especially regarding its strategic control over the Strait of Hormuz.

Why is the Strait of Hormuz so important?

The Strait of Hormuz is a narrow maritime corridor that connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is one of the most important chokepoints for global oil transportation, with around 20% of the world's crude oil passing through it.

Iran’s strategic geography gives it significant influence over this strait, and the country has repeatedly threatened to block it in the event of military action against it. Such threats, even if not executed, are enough to shake oil markets, because they imply:

• Potential supply delays

• Reduced global traffic in oil tankers

• Higher shipping and insurance costs

All of these can lead to a significant increase in global oil prices, particularly if major oil-exporting countries like Saudi Arabia, UAE, Kuwait, and Iraq cannot easily reroute their shipments.

Recent escalation and market reaction

The recent oil price spike is directly linked to Iran’s retaliatory strikes on Israel, as well as its declaration to launch hypersonic missiles and maintain readiness to escalate further. Tehran also hinted that any U.S. intervention in support of Israel could prompt “irreparable consequences.”

This caused immediate jitters in the oil market, with investors pricing in the risk of large-scale disruption. Energy analysts noted that such uncertainty around the Strait of Hormuz historically leads to:

• Surge in crude futures

• Hoarding of inventories

• Rise in speculative trading

By Monday evening, however, prices eased slightly following reports that Iran may be ready to de-escalate via indirect talks, using regional allies to press Washington and Tel Aviv for a truce.

India’s position amidst the turmoil

Despite the global anxiety, India appears cautiously insulated from the immediate impact of rising oil prices.

Union Petroleum Minister Hardeep Singh Puri, in a recent post on social media, highlighted that India’s diversified oil import strategy has significantly strengthened its energy security position.

He stated:

“India has substantially diversified its crude basket and is comfortably placed to manage current oil demand.”

India, which imports more than 80% of its crude oil, has over the past few years:

• Increased sourcing from Russia, the U.S., Brazil, and Guyana

• Reduced overdependence on Middle Eastern suppliers

• Strengthened its strategic oil reserves

However, even with these measures, a sustained spike in Brent crude prices could have cascading effects on:

• Domestic fuel prices

• Fiscal deficit

• Inflationary pressures

• Current account balance

Hence, policymakers in New Delhi are closely monitoring developments in West Asia.

What happens if the Strait of Hormuz is blocked?

While Iran has not carried out its threat to block the Strait, the consequences of such an action would be catastrophic for the global energy supply chain.

According to the U.S. Energy Information Administration (EIA), nearly 21 million barrels of oil per day moved through the Strait in 2024, representing:

• 21% of global petroleum liquids consumption

• Nearly one-third of all seaborne-traded oil

If even a temporary blockade were to occur:

• Oil prices could breach $100 per barrel

• Major energy importers like India, Japan, China, and South Korea would face supply disruptions

• There would be an increased military presence from global powers to secure the passage

In earlier instances, such as in 2012 and 2019, mere threats from Iran caused sharp movements in oil prices.

Can oil shipments be rerouted?

Technically, yes — but the alternatives are limited and expensive:

• Saudi Arabia and UAE could reroute some supplies via the East-West Pipeline to the Red Sea

• Iraq could attempt to export through Turkey's Ceyhan port

• However, these routes lack capacity to handle full volumes

Moreover, global insurers typically raise premiums during conflict, and freight rates skyrocket when war risk looms large.

Global diplomatic efforts in motion

In an effort to contain the damage, reports suggest that Iran has approached Qatar, Oman, and Saudi Arabia to convey to President Trump its readiness to negotiate a ceasefire with Israel.

This marks a significant shift, indicating that Tehran is possibly under pressure due to:

• The economic impact of sustained conflict

• Internal dissent amid rising inflation

• The risk of being targeted by a U.S.-Israel joint operation

For President Trump, who is dealing with:

• An election year

• Escalating conflicts in the Middle East

• And record-high inflation, particularly in fuel

The situation presents both a diplomatic challenge and an opportunity.

Conclusion: Volatility remains

While the initial panic in oil markets has slightly eased, the situation remains highly volatile.

Brent crude remains above $74, and energy analysts warn that any fresh strike or retaliation in the coming days could push prices beyond $80 per barrel, especially if Iran reiterates its Hormuz threat.

India, while buffered through diversification, cannot remain unaffected if prices remain elevated for a long period.

For now, markets await further developments:

• Will Iran de-escalate via diplomatic channels?

• Will Israel halt further strikes?

• Will Trump manage to broker a truce or will the U.S. intervene militarily?

Until these questions are answered, oil markets will continue to reflect geopolitical risk premiums, and energy-importing nations like India must stay prepared.

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