Strait Of Hormuz unblocked: India gets breather as crude prices fall
New Delhi: India’s oil supply risks are set to ease after the US and Iran reached an initial deal to end their war and reopen the Strait of Hormuz. The announcement sparked a global market rally and sent crude prices tumbling.
The Strait connects the Persian Gulf to world markets and handles about 20% of global oil trade. Roughly 50% of India’s oil imports pass through it. The blockade since February had cut Gulf output by 14.4 million bpd and pushed Brent crude from $70 to $119 a barrel.
Following the deal, Brent fell 4.1% to $84 a barrel, its lowest since March. US crude dropped 10.2% to $81.88. Analysts said lower prices will ease pressure on India’s inflation, rupee and trade deficit. “The diplomatic resolution reduces geopolitical risk, and the crude decline is especially beneficial to India,” said Pravesh Gour of Swastika Investmart.
Iran said commercial vessels can now transit via a “coordinated route” during the ceasefire. About 60 million barrels of crude and products stuck in Gulf floating storage can start moving out. India’s Shipping Corp said it is ready to resume Gulf shipments after approvals from the Navy and refiners.
Recovery will be gradual. Experts estimate 60-90 days for supply chains to normalise due to port congestion and 3-week sailing times to Asia. Restarting fields and refineries shut during the conflict will also take time. Still, regional producers can bring back roughly 11 million bpd of output in phases.
Markets reacted sharply. GIFT Nifty futures indicated the Nifty 50 would open 1.5% higher on Monday. The Nifty and Sensex had already gained 2% and 2.3% on Friday after the deal news. Both indices had lost over 6% since the Iran war began in late February.
