West Asia Tensions Fuel Crude Oil Volatility, Risking India's Energy Sector

Stock market expert Sunil Shah attributed the recent market turbulence to deepening geopolitical uncertainty.

"Crude oil prices will rise, gold and silver will rise, currencies will depreciate against the dollar, and capital markets worldwide will decline. The reason is simple: uncertainty. Everyone would like this situation to calm down. But it clearly seems that the attacks will continue for quite some time, even after the death of Iran's Supreme Leader... Let's hope things improve from here," Shah told ANI.

Brent crude has surged amid fears of supply disruptions, particularly around critical shipping routes.

Sehul Bhatt, Director, Crisil Intelligence, underlined India's vulnerability.

"Developments in the Middle East could increase pricing and procurement risks for crude oil and liquefied natural gas (LNG), posing substantial challenges for India, which has more than 85% and 50% import dependency, respectively, on these items," Bhatt said in a note.

Bhatt noted that crude oil prices have jumped above USD 75 per barrel in the past two days.

"If geopolitical issues ease, we expect prices to average USD 65-70 in CY2026, but prolonged conflict could push prices even higher," Bhatt added.

Highlighting supply chain risks, Bhatt said, "Second, while Iran supplies 4.5-5% of global oil, the main concern is disruption at the Strait of Hormuz, which is vital for almost half of India's imports of both commodities, thus increasing vulnerability. If disruptions persist, shipments may be rerouted via the Cape of Good Hope, lengthening transit times and increasing costs, along with rising freight and insurance premiums."

Sumit Pokharna, VP, Fundamental Research, Kotak Securities, said that amid escalating tensions involving the United States, Israel, and Iran, Brent crude prices are expected to remain elevated in the near term.

"The upward movement reflects both tangible supply-side risks and an increased geopolitical risk premium. Market concerns are largely centred around potential disruptions in the Strait of Hormuz, a critical transit route that accounts for nearly 20% of global oil flows," Pokharna added.

For India, which imports roughly 85% of its crude oil requirements, he said higher crude prices present macroeconomic and sector-specific challenges.

"Oil marketing companies (OMCs) are particularly vulnerable, as elevated crude prices can compress refining margins, increase operating and working capital requirements, and lead to higher borrowing costs and debt levels," Pokharna said.

Meanwhile, Vijay Kalantri, Chairman, World Trade Centre, Mumbai, said, "We have enjoyed lower crude oil prices from Russia and Iran. With the latest situation in Iran, we are more impacted by developments there. We will source oil from Venezuela and Russia as per agreements."

He further added, "I hope things will settle down soon, in three to four weeks. Oil prices may not rise further."

As tensions persist, experts indicate that India's energy sector, particularly crude oil procurement and pricing, will remain closely linked to developments in West Asia.

- ANI