US-Iran Tensions Threaten Global Oil Supplies

The resumption of fighting between the United States and Iran has sparked warnings from the International Energy Agency (IEA) regarding the stability of global oil supplies. The conflict has severely disrupted transit through the Strait of Hormuz, a critical waterway for approximately one-fifth of the world’s oil and liquefied natural gas. The IEA noted that supply remains nearly 9.4 million barrels per day below pre-war levels, despite temporary improvements seen in June following a short-lived memorandum of understanding between the two nations.

The latest escalations were triggered by conflicting interpretations of provisions regarding the Strait of Hormuz. While some reports from the US suggest a lull in attacks intended to facilitate backroom diplomacy, others highlight the potential for further military action. Mediation efforts are currently being led by Pakistan and Qatar, with Iranian officials reportedly signaling a willingness to negotiate through third-party channels. However, the market remains on high alert as inventories tighten and shipping remains restricted.

For India, a major global player in refined oil products, this regional instability presents significant energy security risks. While the IEA previously forecast a supply surplus for 2027, this assumes a return to full operation of the Strait of Hormuz. Any prolonged disruption keeps upward pressure on Brent crude prices, which are currently trading near $76 per barrel. Indian petroleum product exports, which were projected to rise by 25% this fiscal year, could face volatility if global demand weakens or if logistical costs continue to climb due to regional transit constraints.