Increasing tension in Hormuz: Will petrol and diesel become expensive again? Why Iran-US dispute is a matter of concern for India Rising tension in Hormuz: Will petrol and diesel prices go up again? Why the Iran-US dispute is a cause for concern for India.

Geopolitical turmoil has once again intensified in the Strait of Hormuz. The ongoing conflict between Iran and America has once again worried the global energy markets. If the proposed deal between the two countries breaks down or the situation becomes war-like, then it can have a direct impact on India’s economy and your pocket. Any disruption in the supply chain of oil and gas can directly lead to increase in inflation in India.

Why is the Strait of Hormuz important?

The Strait of Hormuz is the world’s busiest and most important oil transportation route. A large part of the world’s total marine oil supply passes through this route. India imports most of its crude oil and natural gas needs from Gulf countries. If security issues arise on this route due to tensions between Iran and America, the movement of oil tankers will be affected. Due to this, not only will the prices of crude oil start skyrocketing in the international market, but the delay in supply will also pose a big threat to India’s energy security.

What will be the adverse impact on India’s economy?

India is largely dependent on imports for its energy needs. If crude oil prices increase in the international market, it directly impacts India’s current account deficit (CAD). Expensive imports mean that India’s forex reserves will be spent rapidly and pressure on the rupee will increase. When global crude oil prices rise, oil companies in India may increase the prices of petrol and diesel, making transportation expensive and prices of everyday essentials, including food items, are certain to rise.

Will the crisis increase if the deal breaks?

The breakdown of any deal between Iran and America would be a ‘shock’ for the global oil market. Analysts believe that if tough sanctions are imposed on Iran again or tensions increase, an atmosphere of fear will be created in the market, which may lead to a sudden rise in the price of crude oil. For countries like India, which depend on stable energy supplies to fuel their growing economies, this situation could create a major economic crisis. Although the Indian government uses Strategic Petroleum Reserves to deal with such situations, a prolonged conflict can make the situation difficult.