Hormuz shock: What a USD 100 oil scenario means for India

Oil prices could surge past USD 100 per barrel if tanker traffic through the Strait of Hormuz is not restored quickly, with the chokepoint’s closure threatening roughly 15 per cent of global oil supply and 20 per cent of LNG flows, consultancy Wood Mackenzie has warned.

The disruption follows US and Israeli strikes on Iranian government, military and nuclear facilities, after which Tehran cautioned shipping against entering the waterway. Insurers have withdrawn cover, effectively halting tanker movements.

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Dual supply shock hits global oil market

Wood Mackenzie said the shutdown creates a “dual supply shock”, as current exports through the strait are suspended while additional OPEC+ volumes and most spare capacity, typically used to stabilise the market, remain inaccessible.

Oil prices have already reacted sharply. Brent crude climbed more than 8 per cent to USD 78.72 a barrel, while US-traded crude rose about 7.6 per cent to USD 72.20, after at least three vessels were attacked near the strait.

“The key question is when vessels re-establish export flows,” said Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie. He added that higher tanker rates and insurance premiums would be only a small part of the overall price impact if flows remain disrupted for more than a few days.

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In the most optimistic case, he said, exports could take weeks to resume.

Oil prices are “heavily risked to the upside” during that period, Gelder said, drawing parallels with the early phase of the Russia-Ukraine war when supply fears pushed prices above USD 125 per barrel.

“In the current scenario, oil prices above USD 100 per barrel are possible if transit flows are not re-established quickly,” he said.

India, which imports about 88 per cent of its crude requirements, would face a higher import bill and rising fuel inflation if prices spike.

OPEC+ output hike may offer little relief

Eight OPEC+ members, Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, agreed on March 1 to begin unwinding their voluntary production cut of 1.65 million barrels per day. Output will rise by 206,000 bpd in April, with another review due on April 5.

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Gelder said the move could prove ineffective if Hormuz flows remain blocked.

“The OPEC+ decision does not come as a surprise, due to the uncertainty surrounding the US-Iran tensions, and that the market for non-sanctioned crudes is tight,” said Gelder. “There is, however, a risk that the OPEC+ decision is moot if flows do not resume through the Strait of Hormuz.”

Alternative routes, including Saudi Arabia’s East-West pipeline to the Red Sea and increased Iraqi exports via the Mediterranean, cannot fully replace shipments through the strait.

Strategic petroleum stock releases by International Energy Agency members may provide limited relief, but those countries account for less than half of global oil demand.

Energy expert projects short-term rise in oil price

Energy policy expert Narendra Taneja projected a short-lived period of volatility for the oil market, while predicting the crude oil price to increase to around 80 dollars per barrel during the period.

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Taneja expects stability to return within 7 to 10 days as he anticipates that the US and Israel are likely call for diplomatic negotiations after their objectives are met.

Speaking to ANI, Taneja said, "I'm worried about the way things are going, but my own sense is that probably within the next 7-10 days, things will begin to stabilise. Probably the United States and Israel are going to say, all right, we have achieved what we have set out to achieve, and they will call for peace or negotiations and so on."

Highlighting that the Strait of Hormuz is of major significance for crude oil requirement, he said, "If you look at the oil sector as a whole, since oil is a very important commodity for the global economy. 60 per cent of crude oil that we purchase comes from the Persian Gulf area, therefore Strait of Hormuz becomes very important for us. However, my own sense is that the price of crude oil may go up maybe 80 dollars per barrel for the short term, maybe eight days, and so on."

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Ajay Bagga, Banking and Market Expert, told ANI that the confrontation between Iran and Israel has shifted from deniable operations to overt kinetic signalling, a transition that carries global implications."The most critical variable is not tactical military superiority. It is energy logistics," Bagga said.

He noted that roughly 20-22 million barrels per day, about one-fifth of global oil consumption, transit through the Strait of Hormuz. Even temporary disruptions in this key chokepoint elevate insurance premiums, freight costs, and crude benchmarks.

According to him, markets are already witnessing sharp increases in war-risk insurance premiums, tanker rerouting and naval escort activity, and higher embedded logistics costs.

Outlining possible oil pricing scenarios, Bagga said that in the case of limited escalation, Brent could rise to USD 100-115 per barrel. In the event of maritime disruption, prices may move to USD 120-140, while sustained closure risk could push oil to USD 150 or higher.

On the role of OPEC, he said Saudi Arabia and the UAE hold approximately 4-5 million barrels per day of spare capacity. However, most of that supply still relies on Hormuz transit.

"Spare capacity is helpful but not frictionless," he said.

For oil-importing economies like India, Bagga said the transmission mechanism is direct. Every USD 10 increase in oil widens the current account deficit by roughly 0.4-0.5 per cent of GDP and raises CPI by 30-40 basis points.

LNG disruption could roil global gas markets

A halt in LNG shipments through the strait would also hit gas markets. About 81 million tonnes (110 bcm) of LNG, nearly one-fifth of global supply, transited Hormuz in 2025, largely from Qatar.

“Disruptions to LNG flows would reignite competition between Asia and Europe for available cargoes,” said Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie.

European storage levels are below seasonal norms and about 10 per cent lower year-on-year after a severe January cold spell.

Around 1.5 million tonnes (2.2 bcm) of LNG exports are at risk for each week of disruption, he said. Buyers in Asia and Europe would need to draw more heavily on storage and accelerate summer restocking, tightening markets even after the Strait reopens.

Further pressure could come from precautionary shutdowns of Israel’s Leviathan and Karish gas fields, which supplied over 10 bcm to Egypt last year, forcing Cairo to boost LNG imports. Any disruption to Iranian pipeline gas exports to Turkey, which exceeded 7 bcm in 2025, would add to the strain.

Di Odoardo said a prolonged LNG halt would be comparable in scale to the cut in Russian gas supplies to Europe that pushed prices to nearly USD 100 per mmbtu at their peak and averaged USD 40 per mmbtu in 2022, though the impact could be less severe if the Hormuz disruption proves temporary.

European gas prices surge over 20% on Iran conflict

European gas prices soared more than 20 percent Monday on fears that the Iran war will cut supplies in the Gulf region, notably exports from Qatar.

The Dutch TTF natural gas contract, considered the European benchmark, rocketed to 38.885 euros, having earlier gained more than 22 per cent.

Despite the surge, the price was below the level it reached in January during the northern hemisphere winter.