Why in news?

International oil prices have climbed to a six-month high amid rising US-Iran tensions and fears of potential American military strikes on Tehran. Although recent nuclear talks in Geneva showed limited progress, no concrete breakthrough has emerged to ease concerns.

The US has increased its military presence in the region, and President Donald Trump’s statement giving Iran 10–15 days to agree to a “meaningful deal” has been widely viewed as an ultimatum, intensifying market anxiety over possible supply disruptions.

What’s in Today’s Article?

• Strait of Hormuz: A Critical Chokepoint
• Implications for India
• Strait of Hormuz: The World’s Key Energy Chokepoint
• Blockade Risks and Strategic Calculations
• Oil Price Scenarios if Conflict Escalates

Strait of Hormuz: A Critical Chokepoint

• Oil markets are nervous that any US military action against Iran could disrupt supplies from the Gulf, which dominates global exports.
  • Brent crude has already risen above $71 per barrel, up over 12% in a month, reflecting market anxiety.
  • Future price movements hinge on whether the US undertakes military action and how Iran responds.
  • Prices could ease if diplomacy prevails, or spike sharply—possibly into triple digits—if conflict escalates regionally.
• The key concern is the Strait of Hormuz, a vital transit route for global oil and gas. If Iran blocks or disrupts the strait, energy flows could be severely affected.
• Major producers such as Saudi Arabia, Iraq, the UAE, and Kuwait depend heavily on Hormuz for exports.
• Despite strained ties with Tehran, Gulf nations are engaging diplomatically to prevent escalation.

Implications for India

• Rising Import Bill - India imports around 2 billion barrels of oil annually. Every $1 rise in crude prices adds roughly $2 billion to its annual import bill.
• Strategic Vulnerability - Over 40% of India’s crude imports pass through the Strait of Hormuz. As the world’s third-largest oil consumer, meeting more than 88% of its needs through imports, India faces significant energy security risks if supplies are disrupted.

Strait of Hormuz: The World’s Key Energy Chokepoint

• Described by the US Energy Information Administration as the most important oil transit chokepoint, the Strait of Hormuz handles nearly one-fifth of global petroleum consumption and LNG trade.
• Around 15 million barrels of crude and 20% of global LNG volumes pass through it daily, linking the Persian Gulf to global markets.
• Escalation Risks and Limited Alternatives
  • With US-Iran tensions rising, oil markets fear disruptions not just to Iranian supplies but to wider Gulf exports.
  • Though some bypass pipelines exist, their capacity is limited. Even at full use, about 9 million barrels per day—around 9% of global demand—would remain vulnerable during a major conflict.
  • Iran has repeatedly threatened to block the strait or target tankers.
  • Additionally, proxy attacks from Yemen on vessels in the Bab el-Mandeb—another critical chokepoint connecting the Red Sea to the Arabian Sea—pose further risks to global energy flows.

Blockade Risks and Strategic Calculations

• Although Iran often threatens to close the Strait of Hormuz, analysts say a complete blockade would be self-defeating.
• It could alienate China—its key oil buyer—strain ties with Oman, and invite international military retaliation.
• Despite these deterrents, risks persist. If Tehran feels existentially threatened, it may escalate.
• Any disruption in this globally critical energy corridor would sharply raise oil prices and damage the fragile global economy.

Oil Price Scenarios if Conflict Escalates

• Limited Disruption: Iranian Shipments Targeted - If the US or Israel disrupts Iranian oil exports alone, analysts project oil prices might rise by around $10–$12 per barrel as buyers like China seek alternative supply sources.
• Strait of Hormuz Disruption - If Iran moves to throttle oil flows through the Strait of Hormuz—a chokepoint for roughly 20% of global oil and LNG trade—prices could exceed $90 per barrel.
• Attacks on Iranian Oil Facilities - Should military action target Iranian refineries, platforms, or terminals and keep Iranian supply off the market for longer, oil prices could top $100 per barrel amid broader escalation risk.
• Broad Regional Conflict - In the worst case, if Iran directly attacks major Arab Gulf oil infrastructure or the conflict spreads, prices could surge past $130 per barrel, rivaling spikes seen after major geopolitical shocks.
• Strategic Dilemma for Policymakers - Leaders face a challenge: confronting Iran may risk supply disruptions and sharp price spikes, while restrained action could embolden adversaries—making oil market volatility a key strategic variable.