- Iran-Israel conflict spiked crude prices, raising global supply concerns.
- Geopolitical tensions, OPEC+ output struggles sustain elevated crude prices.
- India faces rising domestic fuel, LPG prices; OMCs incur losses.
The global oil market is once again on edge.
Crude prices surged more than 4 per cent in early Asian trading on Monday after fresh hostilities between Iran and Israel reignited concerns over energy supplies from West Asia. The latest flare-up has rattled investors, pushed oil prices closer to the psychologically important $100-per-barrel mark and raised fresh questions about how long consumers can be shielded from rising fuel costs.
For India, which imports the majority of its crude oil requirements, the implications are already becoming visible. Domestic LPG prices have been increased again, petrol and diesel rates have moved higher in recent weeks, and oil marketing companies continue to grapple with substantial under-recoveries despite successive price revisions.
Oil Rally Returns As Hormuz Concerns Resurface
The latest jump in crude prices came after Tehran launched a barrage of ballistic missiles at Tel Aviv, a move widely seen as a violation of the ceasefire announced earlier this year.
The development has cast fresh doubt over the prospects of normalising operations around the Strait of Hormuz, one of the world’s most critical energy chokepoints.
Nearly one-fifth of global oil and energy shipments pass through the narrow waterway, making any disruption a major concern for energy markets.
In international trade, Brent crude futures for August delivery rose 4.3 per cent to around $97.33 per barrel, while US benchmark West Texas Intermediate futures for July gained 4.4 per cent to trade near $94.50 per barrel.
Analysts say markets are increasingly sceptical that a lasting resolution to the conflict is imminent.
“Expectations for normalization of the Strait of Hormuz have declined for near-term contracts but remain elevated for longer-dated ones. Crude oil prices are also range-bound for longer-dated contracts, suggesting this theme may temporarily move off the market’s radar,” Nomura Securities analyst Naka Matsuzawa said in a report.
Trump-Netanyahu Tensions Add To Market Uncertainty
Investors are also closely tracking developments in Washington, where US President Donald Trump has reportedly urged Israeli Prime Minister Benjamin Netanyahu not to retaliate against Iran’s latest missile attack.
According to Axios, Trump has privately urged restraint amid ongoing diplomatic efforts.
In a separate interview with the Financial Times, Trump suggested that the final shape of any agreement with Tehran would ultimately be determined by Washington.
“He won’t have any choice,” Trump said of Netanyahu.
Making his position even more explicit, Trump added: “I call the shots. I call all the shots. He doesn’t call the shots.”
The comments have done little to calm markets, which remain concerned that any further escalation could prolong supply disruptions and keep energy prices elevated.
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OPEC+ Pumps More Oil, But Markets Remain Unconvinced
Adding another layer to the story, OPEC+ has agreed to increase production quotas by 188,000 barrels from July onwards.
The move marks the fourth consecutive supply increase since the closure of the Strait of Hormuz. However, analysts cited by Reuters believe the additional output is unlikely to significantly ease market concerns.
Many OPEC+ members are reportedly struggling to meet existing production targets because of logistical disruptions linked to the regional conflict and damage to infrastructure in parts of Russia.
As a result, traders continue to focus more on geopolitical risks than on the promised increase in supply.
Strong US employment data has also provided support to oil prices by reinforcing expectations that interest rates could remain higher for longer.
LPG Gets Costlier Again
For Indian households, the impact of higher global energy prices is already becoming visible.
State-owned oil marketing companies have increased the price of a standard 14.2-kg domestic LPG cylinder by Rs 29, marking the second major increase in less than three months.
Following the revision, the price of a domestic LPG cylinder in Delhi has risen from Rs 913 to Rs 942 with effect from June 7.
The increase follows an earlier Rs 60-per-cylinder hike announced on March 7 after the West Asia conflict disrupted global energy supplies and sent international fuel prices higher.
Meanwhile, commercial LPG cylinders continue to trade at substantially higher levels.
A 19-kg commercial cylinder now costs Rs 3,113.50 in Delhi, while prices exceed Rs 3,400 in Patna.
Also Read : Paying Rs 942 For LPG? The Actual Cost Is Much Higher, Says Govt
Oil Companies Still Losing Money
Despite repeated increases in retail prices, state-owned fuel retailers continue to face considerable financial pressure.
Industry estimates suggest oil marketing companies were losing around Rs 703 on every domestic LPG cylinder sold before the latest revision.
Even after the recent increase, the gap between procurement costs and retail prices remains substantial.
The situation extends beyond cooking gas.
Petrol and diesel prices have risen by a cumulative Rs 7.50 per litre since mid-May, while compressed natural gas (CNG) rates have increased by nearly Rs 6 per kilogram. Yet fuel retailers continue to absorb part of the burden.
Industry estimates indicate under-recoveries currently stand at approximately Rs 11 per litre on petrol and Rs 33.6 per litre on diesel.
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Why Fuel Prices May Stay Elevated
The bigger concern for consumers is that the factors driving fuel inflation show few signs of disappearing.
The West Asia conflict has now stretched beyond 100 days, and uncertainty surrounding the Strait of Hormuz continues to dominate energy markets.
For a country like India, which relies heavily on imported crude oil, sustained disruptions translate directly into higher import bills and greater pressure on fuel retailers.
So far, the government has attempted to soften the impact by allowing state-owned oil marketing companies to absorb a portion of the increased costs rather than passing the entire burden on to consumers.
However, with crude prices once again approaching $100 per barrel and geopolitical tensions showing little sign of easing, the balancing act is becoming increasingly difficult.
