Oil prices have climbed sharply as tensions in West Asia intensify following the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei and the subsequent military confrontation involving Iran and the United States.
Brent crude touched a high of USD 78.52 per barrel, rising nearly 10 per cent as traders reacted to the growing uncertainty. The spike reflects fears that the conflict could disrupt energy supplies from one of the world’s most sensitive oil corridors.
The latest escalation has shifted the market’s focus from battlefield developments to the security of oil routes. According to Ajay Bagga, a banking and market expert, the bigger concern is not military strength but the safety of energy shipments.
“The most critical variable is not tactical military superiority. It is energy logistics,” Bagga told ANI.
Why the Strait of Hormuz matters
Around 20–22 million barrels of oil pass daily through the Strait of Hormuz, accounting for nearly a fifth of global consumption. Even a brief interruption in this narrow sea passage can push up shipping insurance costs, freight rates, and global oil benchmarks.
Bagga said there are already signs of rising war-risk insurance premiums, rerouting of tankers, increased naval escort operations, and higher logistics expenses built into oil prices.
He outlined possible price paths if tensions continue. In a scenario of limited escalation, Brent could climb to USD 100–115 per barrel. If maritime movement is disrupted, prices may reach USD 120–140. A prolonged closure risk, he warned, could send oil beyond USD 150.
On whether additional supply could cushion the blow, Bagga noted that Saudi Arabia and the UAE together have spare capacity of around 4–5 million barrels a day. However, most of that supply also moves through Hormuz.
“Spare capacity is helpful but not frictionless,” he said.
What it means for India
For countries that rely heavily on imported crude, the impact is immediate. Bagga said every USD 10 increase in oil prices can widen India’s current account deficit by around 0.4–0.5 per cent of GDP and push up consumer inflation by 30–40 basis points.
“This is not simply a geopolitical story. It is a macroeconomic story,” he said.
He added that sectors such as automobiles, chemicals, paints, aviation, and oil marketing companies may face pressure if higher costs are not fully passed on. On the other hand, upstream oil producers, defence companies, IT firms benefiting from a stronger dollar, and gold-linked investments could see relative gains.
“Geopolitical risk is no longer episodic. It is structural. 2026 marks the return of hard geopolitics,” Bagga said, advising investors to prepare portfolios for the possibility of USD 120 oil, diversify across regions, hold real assets and hedge currency exposure.