Israel-Iran War Update: Rising oil prices from Middle East tensions raise concerns over petrol, diesel and food costs, but government buffers limit immediate impact.
Global crude surges amid Middle East conflict, fueling fears of higher petrol and diesel prices worldwide (Photo: File)
Israel-Iran Tensions: The escalating conflict in the Middle East following US-Israel strikes on Iran has sent shockwaves through global energy markets. The previous week witnessed a nearly 10% increase in oil prices and this is alarming with respect to the fuel prices across the globe. The question to the consumers is whether these increases will soon be reflected in the price of petrol and diesel.
International crude oil standards have swiveled considerably upwards. Brent crude hit 80 barrels, and the US WTI futures increased 8.6% to $72.79, compared to approximately 67 on Friday. The 88% of the imported crude oil may result in an increase in the import bill in India, although the prices of domestic pump are not increased yet because of the government intervention.
Current Global Oil Prices: Brent crude around $79–$80/barrel and WTI near $73/barrel after Israel-US strikes on Iran.
Current India Pump Prices: Petrol ₹133.2/litre and Diesel ₹142.7/litre (AA & RAC data).
Expected Fuel Price Rise if Oil Holds at $80: Petrol could rise to around ₹136/litre while Diesel could increase to approximately ₹145/litre.
If Oil Climbs Further: At $90/barrel, petrol may hit ₹140/litre and diesel around ₹150/litre. While at $100/barrel, petrol could reach ₹150/litre and diesel above ₹155/litre.
The transmission of fuel prices to consumers is determined by the costs, (taxes) of crude, and refinery margins. According to AA UK petrol is at 133.2p per litre and diesel is at 142.7p. Analysts indicate whether oil will stay over 80 then petrol may reach 136p/litre and diesel to 140p. A sharp increase may affect retail rates in several weeks, but temporary increase may not be possible unless prices are sustained.
A high proportion of the imported crude in India is shipped via the Strait of Hormuz where 20% of the world oil is exported. The threats by Iran to close the strait may interfere with supply forcing the vessels to by-pass the Cape of Good Hope, which leads to additional transit time, freight and insurance. Crude hit briefly a record of $119 per barrel in geopolitical crises in 2022, but businesses operated.
Increased fuel price increases transportation and production costs which are indirectly increasing food prices. Fertilizers are also produced using crude oil derivatives and thus long term price spikes may impact on agricultural expenses. The spike is in the short-term, so it will not lead to immediate food inflation, but a sustained disruption would increase the cost pressures.
Existing tariff-based or price-capped plans also mostly protect households in the short term. The UK energy bills will be due till July but variable tariffs can be raised in case the wholesale prices remain high. Oil price increases may result in inflationary pressures, which may percolate to the cost of future billing in sectors that rely on electricity and gas.
After the recent rate cuts the UK inflation has been lowered to 3.75%. Inflationary factors may with a high price of oil re-enter the picture and make a further step in the reduction of borrowing costs slow. According to economists, a tight rein is recommendable and it is probable that the Bank of England will keep the rates unchanged in the near future to monitor the changing effects of fuel costs.
Why did oil prices spike?
US-Israel strikes on Iran and threats to the Strait of Hormuz drove Brent to $80/bbl.
Will fuel prices rise immediately?
Not in the short term; government buffers in India and price caps in the UK shield consumers.
How are food prices affected?
Transportation and fertilizer costs may rise if crude remains elevated.
Are energy bills impacted?
Fixed-rate users are protected, but variable tariffs could increase later.
How long will the oil surge last?
Depends on conflict duration and shipping disruptions through Hormuz.
