By The Sampadak Express
The world is currently on edge, teetering on uncertainty due to escalating global conflicts. From the prolonged Russia-Ukraine war to the Armenia-Azerbaijan dispute, and now the intensifying Iran-Israel confrontation it seems that just as one war nears its end, another erupts. Some conflicts never fully resolve, continuing to send shockwaves across the international stage.
These aren’t just bilateral tensions they often impact the broader global economy. The latest Iran-Israel conflict could potentially be a major disruptor. If tensions escalate, countries like India with its massive population and high dependency on oil imports could face serious economic challenges. Here’s a detailed analysis from The Sampadak Express on how this war might affect oil markets and the global economy.
What Is the World’s Biggest Concern After the Iran-Israel War Broke Out?
After Israel launched airstrikes on Iran on June 13, global markets began fearing a potential closure of the Strait of Hormuz a critical maritime chokepoint for global oil and gas supply. The Strait is a narrow waterway connecting the Persian Gulf to the Arabian Sea and serves as a lifeline for transporting oil from major Middle Eastern producers to Asia, Europe, and North America.
This strategic area has long been a flashpoint for geopolitical tensions.
Oil Prices Surge Amid Tensions
Even before any physical disruption, the threat of conflict has already jolted oil markets. Following the Israel-Iran flare-up, oil prices surged significantly. On Monday, Brent crude jumped by 2.8%, crossing $76.37 per barrel, while U.S. crude increased to $75.01 per barrel. This comes on the heels of a 7% spike recorded the previous Friday.
Why Is the Strait of Hormuz So Important?
Located between Iran and Oman, the Strait of Hormuz is just 33 kilometers wide at its narrowest point. Yet it handles nearly one-fifth of the world’s oil supply. Oil from countries like Saudi Arabia, the UAE, Kuwait, and Iran is transported through this chokepoint. Additionally, Qatar, the world’s top exporter of liquefied natural gas (LNG), also relies heavily on this route.
During the Iran-Iraq War (1980–1988), both nations tried to block each other’s oil exports through this waterway. Attacks on commercial tankers during that period heavily disrupted international energy supplies. This phase in history is now referred to as the “Tanker War.”
What Happens If Iran Shuts Down the Strait of Hormuz?
If Iran moves to block the Strait, it could disrupt nearly 20% of global oil shipments, according to estimates. A JPMorgan report in June warned that such a scenario could push crude oil prices to $120–130 per barrel.
Even the possibility of a closure is enough to shake the markets. While no direct attack on oil storage facilities or refineries has occurred so far, energy analysts warn that if the war escalates, critical infrastructure could be targeted severely impacting global oil flow and economic stability.
For India, the Strait is particularly crucial. Roughly two-thirds of India’s oil and half its LNG imports pass through this route. Any blockage would mean delays in shipping, shortage of supply, and sharp price hikes.
The Strait’s History of Conflict
The Strait of Hormuz has long been at the heart of geopolitical standoffs, especially between Iran and the U.S.
In 1988, a U.S. Navy warship mistakenly shot down an Iranian civilian airliner, killing 290 people. The U.S. claimed it was a military error, mistaking the plane for a fighter jet.
In 2012, following Western sanctions on Iran, Tehran threatened to block the Strait, calling the sanctions a tactic to cripple its oil revenues. Again in 2018, when the U.S. aimed to “zero out” Iranian oil exports, then-President Hassan Rouhani hinted that Iran might halt oil movement through the Strait in retaliation. Iranian military commanders also echoed this threat.
Impact on India and the Global Economy
The war, now ongoing for over five days, is increasingly affecting the global economy. For India, prolonged conflict could mean:
1. Price hikes on essentials and electronics like mobile phones, laptops
2. Fertilizer shortages, leading to costlier crops and food
3. Increased costs for chemical products, plastic, industrial salt
4. Supply disruptions in fruits, nuts, edible oils
5. Rising prices of iron, machinery, gold, silver, and jewelry
Global Response: G7 Appeals for De-escalation
While G7 countries have called for calm and urged both Iran and Israel to dial down the conflict, no concrete resolution has emerged so far. This indicates that the global situation is unlikely to stabilize anytime soon.
As tensions deepen, the world watches with bated breath. If the conflict spills into the Strait of Hormuz, the consequences won’t be limited to the battlefield they’ll hit every corner of the global economy.
For countries like India, the stakes are high. A prolonged conflict could mean soaring inflation, strained foreign exchange reserves, and economic disruption on a massive scale.
Stay tuned to The Sampadak Express for ongoing updates on this developing global story.
