Global benchmark Brent crude topped the $100-per-barrel mark Thursday for the first time in nine weeks, according to Business-Today, as renewed conflict between the US and Iran in West Asia disrupted shipments through the Strait of Hormuz, while Tehran-backed Houthi rebels continued to target shipping through the Bab el-Mandeb Strait. Brent jumped nearly 7% in a day and was trading at $100.71 per barrel (at 8.30 pm) for September contracts. The Indian basket of crude also climbed to $93.19 per barrel Wednesday, up nearly 40% from the July 2 levels of $67 per barrel, when the US and Iran appeared poised to work out a peace deal.
Supply Disruptions and Geopolitical Risk
The conflict has raised concerns about two critical chokepoints: the Strait of Hormuz and the Bab el-Mandeb Strait. According to Business-Today, a senior executive of an oil marketing company said the current rise in crude prices related to September contracts could hurt the finances of oil retailers in the second and third quarters if the trend persists for a few more weeks. After incurring under-recoveries on petrol, diesel and domestic LPG during the earlier conflict, oil retailers had broken even in the last week of June as crude prices softened to near pre-conflict levels. However, they were still losing on cooking gas cylinders, and that burden would rise further.
In the June quarter, state-owned HPCL and BPCL reported combined losses of over Rs 14,000 crore while recording LPG under-recoveries of over Rs 7,000 crore.
Company and Analyst Reactions
During an analysts call Thursday, BPCL's director (finance), VRK Gupta, said markets witnessed a brief period of stability in June, but the latest geopolitical developments had reminded everyone how quickly they could reshape the operating landscape. He added that the absence of any discount on Russian crude adds to concerns, although Russian supply does provide stability in terms of supply.
Additional worry stems from disruption to shipping through the Bab el-Mandeb Strait, which officials said could emerge as the next major energy security challenge, threatening crude supplies from both Saudi Arabia and Russia while driving up freight costs and global oil prices. Saudi Arabia has increasingly relied on its East-West Pipeline to move crude to its Red Sea port of Yanbu, bypassing Hormuz. A large number of vessels carrying cargo to India and other Asian countries from Europe transit the Suez Canal before passing through the Red Sea and Bab el-Mandeb to reach their destinations.
Prashant Vasisht, senior vice-president and co-group head at corporate ratings agency ICRA, said Saudi Arabia had recently become India's third-largest crude oil supplier after Russia and the UAE. It is supplying 5.5-5.9 million barrels a day to global markets through its Red Sea ports, primarily Yanbu. "If this supply is threatened, it would have an inflationary impact on global crude oil prices," Vasisht said.
Key Price Data
| Metric | Value | Change |
|---|---|---|
| Brent crude (Sept contract) | $100.71/bbl | +7% in one day |
| Indian basket crude (Wednesday) | $93.19/bbl | +40% from July 2 ($67) |
| HPCL + BPCL combined losses (June quarter) | Over Rs 14,000 crore | N/A |
| LPG under-recoveries (June quarter) | Over Rs 7,000 crore | N/A |
Implications for Market Participants
The surge in crude prices and the threat to supply routes through Bab el-Mandeb and Hormuz signal heightened risk for commodity traders and procurement teams. According to analysts cited by Business-Today, the absence of a Russian crude discount and the potential disruption to Saudi supplies via Red Sea ports could keep prices elevated. For Indian oil marketing companies, the financial strain from under-recoveries may deepen if the geopolitical situation does not de-escalate quickly. Key data releases to watch include weekly US EIA inventory reports and any diplomatic developments between the US and Iran.
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