Updated April 21st, 2024 at 14:56 IST

Iran-Israel conflict raises oil and LNG price concerns, analysts warn of inflation spiker

The Strait of Hormuz is vital for oil-exporting countries, with Saudi Arabia alone exporting 6.3 million barrels per day (bpd) through the strait.

Reported by: Business Desk
Iran-Israel conflict raises oil and LNG price concerns; analysts warn of inflation spiker | Image:Pexels
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Iran-Israel conflict: The escalating conflict between Iran and Israel has analysts concerned about potential disruptions to oil and LNG supplies, which could lead to a surge in prices and inflation. The Strait of Hormuz, a critical sea passage through which a significant portion of global oil and LNG trade flows, is at the centre of these concerns.

If Iran were to block the Strait, countries like India, which heavily depend on oil imports from Saudi Arabia, Iraq, and the UAE, could face supply disruptions. Analysts predict that such a move could result in a sharp increase in oil and LNG prices, affecting not only India but also global markets.

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The Strait of Hormuz is vital for oil-exporting countries, with Saudi Arabia alone exporting 6.3 million barrels per day (bpd) through the strait. Additionally, about 20 per cent of global LNG trade passes through the strait, including exports from Qatar and the UAE.

While alternative routes exist for oil, such as the East-West pipeline in Saudi Arabia and onshore fields linked to export terminals in the UAE, they may not be able to accommodate the volume currently passing through the strait. This could lead to higher freight costs and supply chain disruptions.

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Experts suggest that the closure of the strait could have significant implications for Asia-Pacific economies, which are already grappling with inflationary pressures. Moody's Analytics warns that higher oil prices could further complicate efforts to manage inflation and economic stability in the region.

As tensions in the Middle East continue to escalate, stakeholders are closely monitoring the situation, with a focus on potential disruptions to oil and LNG supplies and their impact on global markets and economies.

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(with PTI inputs)

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Published April 21st, 2024 at 14:53 IST