Oil tops $115 as Kharg Island threat signals deeper escalation in West Asia

Global oil prices jumped sharply and Asian stocks fell on March 30 (Monday) as tensions between the United States, Israel and Iran escalated, raising fears of prolonged disruption to energy supplies.

Brent crude rose more than 3% to above $115 a barrel, while US-traded oil climbed to around $103 after gaining about 3.5%. The benchmark is now on course for its biggest monthly rise on record. Asian equity markets reacted immediately, with Japan’s Nikkei 225 dropping 4.5% and South Korea’s Kospi falling 4%.

Conflict widens, supply routes under threat

The escalation follows developments over the weekend. Iran-backed Houthi rebels in Yemen entered the conflict by launching strikes on Israel. Iran also signalled it could expand retaliatory actions, including targeting key institutions and residences linked to US and Israeli officials.

The United States indicated a more aggressive posture, including the possibility of taking control of Iranian oil assets such as Kharg Island. At the same time, additional American troops have arrived in the region, while Iran’s leadership signalled readiness to confront them.

Energy markets have turned highly volatile after Iran threatened to target vessels passing through the Strait of Hormuz. Nearly 20% of global oil and gas supply moves through this route, and shipments have largely come to a standstill. Concerns are also rising around the Bab al-Mandeb strait near Yemen, a corridor that carries about 10% of global oil. Any disruption there could further strain supply chains.

Oil prices have climbed sharply from around $72 a barrel on February 27 to recent highs near $119.50. Projections indicate further increases if tensions persist.

India cushions consumers despite global volatility

In India, petrol and diesel prices remained unchanged on Monday, even as global markets fluctuated. Oil marketing companies continue daily revisions at 6 am based on international crude rates and currency movements, but have held retail prices steady to avoid sudden shocks.

Authorities have indicated that prices are likely to remain stable in the near term, with companies absorbing part of the volatility. This approach aims to provide relief to consumers and contain inflation.

Petrol and diesel rates have broadly remained unchanged since May 2022, following tax cuts by central and state governments. However, pricing remains linked to global crude trends, exchange rates and taxation structures.

Despite the pause in regular fuel price revisions, pressure is building. Rising crude prices and a weakening rupee are increasing costs for companies such as BPCL, HPCL and IOCL. If global prices remain elevated, sustaining current rates may become difficult.

Premium petrol variants have already seen increases of around ₹2 to ₹2.3 per litre in several cities. At select outlets, Indian Oil’s XP95 is now priced at about ₹101.80 per litre, with similar hikes by other retailers.

Fuel pricing in India depends on multiple factors, including crude oil costs, the rupee-dollar exchange rate, central and state taxes, refining expenses, and demand-supply conditions.