Crude steadies after 10% spike, but Hormuz risks keep India on edge

Crude oil prices traded about 1% higher in early trade on Tuesday, cooling after Monday’s sharp spike as the US signalled steps to mitigate rising domestic energy prices. However, concerns over supply disruptions through the Strait of Hormuz continued to underpin prices.

At 7:13 AM, the April Brent contract on the Intercontinental Exchange was trading at $78.68, up 1.22% from its previous close. The April West Texas Intermediate contract rose 0.84% to $71.83 per barrel on NYMEX.

On Monday, prices had surged over 10% as markets reopened amid escalating conflict in West Asia.

Crude’s latest spike, triggered by escalating West Asia tensions and disruptions around the Strait of Hormuz, has reignited fears of a triple-digit oil rally. For import-dependent India, sustained prices above $100 could swell the oil bill, stoke inflation risks and pressure fiscal math unless supply flows stabilize quickly.

US Secretary of State Rubio on Monday told reporters that Treasury Secretary Scott Bessent and Energy Secretary Chris Wright would announce plans on Tuesday to address rising energy prices.

The announcement helped temper some of the panic that had driven Monday’s spike.

India’s import risk

The rise in crude prices is significant for India, which imports nearly 90% of its oil requirement. In FY25, India imported oil worth $160 billion. Estimates suggest that a $1 per barrel increase sustained over a year can raise the country’s annual import bill by around ₹16,000 crore.

Energy supplies from West Asia have already dwindled, with ships avoiding the Strait of Hormuz and a few vessels reportedly being hit by the Islamic Revolutionary Guard Corps. The strait caters to over 50% of India’s oil imports.

After the closure of the Strait of Hormuz, the halt in operations at Saudi Arabia’s largest oil refinery — Ras Tanura — following an attack by Iran is also expected to severely hit energy markets. The refinery has a capacity to process 550,000 barrels of oil per day.

Mint earlier reported that India is exploring alternate supply options including Russia, Africa and South America. Among these, Russia is seen as the most logistically and economically viable in the near term.

Supply shock looms

Experts warn that a prolonged conflict could push oil prices sharply higher.

Morgan Stanley on Monday said Brent crude prices could spike to $120 per barrel if a full-scale conflict in West Asia leads to sustained disruption of oil flows through the Strait of Hormuz.

Ajay Parmar, director of energy and refining at Independent Commodity Intelligence Services, a London-headquartered commodity analysis firm, said that the risk of prolonged Iranian disruption and potential closure of the strait is reshaping market expectations and pricing behaviour, with Brent potentially approaching or exceeding $100 per barrel if the closure persists.

The Strait of Hormuz remains a critical global energy choke point, with nearly 20% of global petroleum liquids and 20% of global liquefied natural gas (LNG) shipments transiting through it. Any escalation in regional conflict could impede energy shipments through this corridor.

Shweta Singh, associate professor, department of international relations, South Asian University said:

"The escalation will peak in the next few days, or weeks, as Trump would want a decisive outcome, and Iran would think escalation is the way to a ceasefire. With the war now a full blown regional conflict, for the regime in Iran, it is a hard issue of survival- and conflict escalation would fit the cost- analysis template for Iran. Despite substantive damage to Iran's proxies, we might see asymmetrical warfare in full swing."

On the energy front, she added:

“India is watching the developments closely. India might be able to absorb a temporary closure of Hormuz, but a prolonged closure will require it to diversify- if it looks to Russia again, time is a crucial issue. Further prolonged closure, will bring India into tight space.”