Oil prices in international market jumps 9 per cent
Oil prices jumped over 9% after Israel attacked Iran’s nuclear sites, raising tensions. Iran may retaliate, risking wider conflict. Despite supply risks, markets are well-stocked. India’s inflation and economy remain stable for now, says Emkay Global
New Delhi: Oil prices in the international market jumped by more than 9 per cent on Friday after Israel’s attack on Iran’s nuclear facilities and missile production sites led to a further escalation in geopolitical tensions in the Middle East.
The price of benchmark Brent crude surged by over $6 to cross a five-month high of $78 per barrel. Israel has further declared a state of emergency, expecting retaliation from Iran. US President Donald Trump has warned that this may lead to a massive conflict, though the US denied any involvement in the Israeli strikes.
The Israeli action comes against the backdrop of talks on a nuclear deal between the US and Iran having soured and Tehran stating that if it is attacked, it would retaliate against US bases in Iraq and adjoining countries. The US has asked some of its personnel there to exit.
According to a report by Emkay Global, Iran produces around 3.3 million barrels per day (mbpd) of crude oil (3 per cent of global production) and exports around 1.5 mbpd, with China being the main importer (80 per cent), followed by Turkey. Iran is also on the northern side of the Strait of Hormuz/Persian Gulf through which 20 mbpd+ of oil trade flows, with Saudi Arabia and the UAE etc also shipping, and in the past it has warned of blocking the same.
Hence, a wider Middle East conflict with impact on Saudi, Iraq, Kuwait and UAE oil supplies can lead to a sharp spike in oil prices. With the US-China trade conflict, China didn’t adhere to western sanctions on Iran and kept buying the same, though in the last few months it was reported that they reduced intake. India doesn’t import any Iranian oil, the report states.
However, there is a risk of this escalating, though earlier, once Israel attacked Iran, with the latter retaliating and both claiming success and denying major damage, the tensions faded. However, in this case, more details are awaited and in the near term oil would be highly volatile, the report added.
Significantly, with OPEC+ announcing another higher than expected production hike in July, fundamentally oil markets remain well supplied and further Iranian supply cuts can be accommodated, the Emkay report states.
As far as the impact on the Indian economy is concerned, the report states: “As of now, we are not changing our forecasts and continue to see CPI inflation undershooting RBI’s estimate of 3.7 per cent to average much lower 3.3-3.4 per cent in FY26. We note every $10/bl increase in oil leads to annualised gain of 35 bps in CPI inflation.”
Emkay Global said it maintains FY26 CAD/GDP at 0.8 per cent, at Brent 70/bbl, with every 10$/bbl leading to upside risk of 0.4-0.5 per cent, other things remaining equal.
“Our Energy team maintains a positive view on India’s oil market companies on the back of strong marketing margins and core GRMs (gross refining margins) also holding up to $75/bbl Brent for the remaining part of the year. Our estimates don’t see downside risks,” the report added.
