Rising tensions between America and Iran have pushed crude oil prices higher again. Meanwhile, crude prices have reached the $91 per barrel level. The Strait of Hormuz blockage has already disrupted nearly 20 percent of global fuel supply.
Additionally, Yemen’s Houthi rebels announced a blockade against Saudi oil ships. Therefore, the Red Sea route has entered a dangerous phase.
Why Have Houthis Targeted Saudi Arabia?
Houthi rebels operate as an Iran-supported group. However, their latest move follows growing US-Iran tensions. After America stopped oil and gas tanker movement from Iranian ports, Houthis started targeting Saudi Arabia. The group considers Saudi Arabia a major US partner in the Gulf region. Moreover, Houthis announced restrictions on Saudi Aramco oil tankers. They used drones and anti-ship cruise missiles near Bab al-Mandab.
How Can Shipping Disruptions Affect Global Trade?
The Hormuz route carries around 20 percent of global energy supplies. Similarly, the route handles nearly 12 to 15 percent of global maritime trade.
Furthermore, around 10 percent of worldwide oil supply passes through this route. If shipping companies avoid the Red Sea, they may choose the Cape of Good Hope route.
Consequently, journeys could become 14 to 30 days longer. Longer routes will increase fuel expenses for ships. Also, marine insurance premiums could rise due to higher risks.
Why Does This Create Pressure For India?
India imports large quantities of crude oil from Russia. The supply reaches India through the Black Sea, Suez Canal and Red Sea routes.
However, Houthis have not announced attacks on Russian ships. Still, rising tensions across the region could create challenges. Meanwhile, Indian exports could also face pressure. Products like textiles, tea, basmati rice and engineering goods travel through the Red Sea and Suez Canal. Therefore, route changes may increase export costs. Indian products could become more expensive and less competitive in global markets.
Will Petrol And Diesel Prices Increase In India?
If crude oil prices remain around $91 or higher for a longer period, fuel prices may face pressure.
According to the reference, petrol and diesel prices could rise by Rs 3 to Rs 5 per litre from the first week of next month.
However, authorities have not made any official statement regarding this possible increase.
