New Delhi: The second round of hostilities between Israel and Iran after a year have fuelled concerns about oil prices and the resultant impact on inflation. Israel and Iran are engaging in retaliatory missile and drone attacks, but global experts aren’t worried about their effects on oil supplies, despite the recent rise in crude prices.
Due to crippling US sanctions, most countries don’t buy Iranian oil, except China. Instead, most countries including India source their crude supplies largely from OPEC members like Iraq, UAE and Saudi Arabia, which continue to maintain their production commitments.
There was no significant change in oil prices even after the Russian invasion of Ukraine in 2022. Indian public sector Oil Marketing Companies (OMCs) IOC, BPCL and HPCL are expected to absorb the near term price increases, rather than pass them over to the consumers, as they have done earlier.
“ The 10 per cent rise in crude prices seen so far is not on account of supply concerns, but due to psychological factors. Other countries may step in if the situation escalates,” explains Bank of Baroda chief economist Madan Sabnavis. Only a significant spike in oil prices can impact India’s fiscal situation, leading to a corresponding rise in the wholesale price index (WPI), affecting inflation.
Even a $10/20 rise in crude prices will not meaningfully affect India, considering the size of India’s economy, even as higher oil prices could weaken high valuations in the Indian market, a report by Kotak Institutional Equities said in a client report.
Nevertheless, the Government is taking notice. Petroleum Minister Hardeep Singh Puri tweeted:
As oil is on the boil, all eyes are on the ball…
In the increasingly volatile geopolitical situation, reviewed the petroleum products supply situation with @PetroleumMin officials and our PSU OMCs. Under the visionary leadership of PM @narendramodi Ji, we have diversified our… pic.twitter.com/J58LSEC2cV— Hardeep Singh Puri (@HardeepSPuri) June 16, 2025
