International crude oil benchmark Brent has breached the $100-per-barrel-mark again after one-and-a-half months, triggered by the recent sharp escalation in the West Asia conflict, including attacks on oil tankers and petroleum infrastructure in the region. The $100 threshold was breached on Wednesday, and Brent futures continue to trade above that level on Thursday.

High oil prices are of particular concern for India, which depends on imports to meet the lion’s share of its petroleum requirement. More than any momentary elevation of oil prices beyond the psychologically-important $100-per-barrel mark, the worry for India is how long prices are expected to remain high. Oil prices have gained over 25% since early August.

The West Asia conflict, which has been ongoing for over six months now, has evidently entered another phase of kinetic action between the US and Iran, squeezing yet again energy flows that had seen some improvement in the past months and further building up the already elevated war risk premiums for energy shipments. Early signs of recovery in oil imports by China, the world’s largest importer of crude, are also feeding into higher prices at a time when energy flows from West Asia through the Strait of Hormuz remain highly constrained.

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Prior to the war, the strait between Iran and Oman accounted for a fifth of global oil and liquefied natural gas (LNG) flows. The conflict led to an effective closure of the critical maritime chokepoint, severely stifling oil and gas flows through it, and sending global energy markets into a tizzy. Over the past two-three months, however, oil and gas flows from the region saw some recovery, although they remained substantially lower than the pre-war levels. The recent conflagrations pose a risk to that modest recovery.

Triggers for $100-plus oil price

“The US carried out additional strikes on Iranian oil tankers near Kharg Island, hitting 5 vessels in response to Iran attempting to strike a US Navy warship. This resulted in Iran firing ballistic missiles towards Jordan, while also warning vessels in the Persian Gulf could be targeted. Recent developments only reinforce the view that we’re still some way from a restart in (peace) talks. In the meantime, the market is likely to continue to price in a sizeable risk premium,” ING’s commodities strategists Warren Patterson and Ewa Manthey said in a note on Wednesday.

Apart from the attacks by Iran and the US, Iran-backed Houthi militia also attacked targets in Saudi Arabia, including oil and gas installations.

Last week, Morgan Stanley commodities strategist Martijn Rats forecast that Brent would average $100 per barrel in the October-December quarter. Despite a break-down in peace talks between the US and Iran over the past couple of months, oil prices didn’t spike as there were indications that energy flows through the Strait of Hormuz had improved from the minimal levels seen in the initial months of the war. Brent crude spot prices averaged at about $85 per barrel in June, around $83 in July, and almost $91 in August.

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Industry experts and analysts, however, had warned that any significant escalation in the conflict could catapult oil prices beyond a $100, where they might sustain there in the absence of evident de-escalation in hostilities. The concern now goes beyond the Strait of Hormuz, as countries that had relied on their built-up oil inventories to mitigate the impact of the West Asia conflict, would be returning to the market to buy oil.

“If the current geo-political situation persists, crude oil prices could rise further given that several countries including China were tapping their strategic reserves for a significant proportion of their consumption and their return to the market could increase demand in a period of restricted supplies,” said Prashant Vasisht, senior vice president and co-group head, corporate ratings at ICRA.

Another reason for China to increase oil imports from available sources is the crash in Iranian oil exports due to the US attacks and naval blockade. China was the main destination of US-sanctioned Iranian oil, and with those flows now reduced to a trickle, Beijing is bound to go shopping for oil elsewhere, feeding into higher oil prices in the process. Although China’s overall oil imports remain well below the pre-war levels, trade sources indicate an uptick in Chinese refiners’ oil buying activity in recent weeks.

A headache for India

Energy imports are a major component of India’s overall imports, and any meaningful increase has ramifications for the country’s trade balance, current account, inflation, and the rupee’s exchange rate, among others. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 88% of its requirement. Put simply, an oil shock can be considered an external tax on the Indian economy.

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Given its high oil consumption and import dependency, India is already bearing the brunt of high oil prices. The country imports 1.8-2 billion barrels of oil a year, and every $1-per-barrel increase in price bumps up its oil import bill by up to $2 billion on an annualised basis. According to a March report by Nomura, India is among the three Asian economies most vulnerable to high oil prices, the other two being Thailand and South Korea.

It also said that every 10% oil price increase typically widens India’s current account deficit by 0.4% of the GDP. Crude oil alone is the country’s largest merchandise import. According to Commerce Ministry data, crude oil imports in 2025-26 stood at about $135 billion. If oil prices sustain at $100 per barrel in the current financial year and import volumes don’t decline, the oil import bill could be upwards of $200 billion for the year. If the price sustains at a much higher level, the implications would be even graver.

Amid the West Asia conflict, India’s crude oil import bill surged by over 56% on a year-on-year (y-o-y) basis in April-July to $63.4 billion, even as import volumes rose slightly to 81.9 million tonnes — or about 600 million barrels — from 81.5 million tonnes, as per data from the Petroleum Planning and Analysis Cell (PPAC).

Heavy dependence on energy imports has led to a double whammy of supply tightness and price surge. While highly diversified crude sourcing has helped in ensuring adequate oil, petrol, diesel, and jet fuel availability, some rationing of gas supplies to certain industries and commercial consumers was done in order to ensure adequate availability for households and a few priority sectors.

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The surge in international prices of oil and gas has forced India to import oil and gas at extremely high rates, as supply security had to be prioritised over price considerations. Moreover, oil companies are incurring high additional costs due to emergency sourcing and a surge in shipping and insurance rates, among others. And the longer this continues, the worse off India will be from various economic standpoints.

Public sector fuel retailers are currently estimated to be losing about Rs 5 per litre on retail petrol sales and over Rs 20 on diesel sales, according to industry analysts and experts. Amid the West Asia conflict, which has been on for over six months now, public sector oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum, and Hindustan Petroleum — only partially passed on to retail consumers the international price increase in fuels like petrol, diesel, and liquefied petroleum gas (LPG), resulting in heavy losses to the companies.

“With escalation in hostilities between Iran and the US, Brent prices have crossed the $100/barrel mark today and the Indian crude basket is at around $109/barrel. At the average price for the month of September till date, marketing margins on petrol are negative Rs 5/litre and diesel at negative Rs 23/litre, and under recoveries on domestic LPG are at Rs. 200/cylinder,”said Vasisht.

After narrowing over the past two-three months, the losses are now widening again amid the recent spurt in global prices, increasing pressure on the OMC finances. The three companies collectively reported a net loss of over Rs 18,000 crore for the April-June quarter. For over three months now, retail petrol and diesel prices haven’t changed. Prices were last revised in May by a total of Rs 7.35 per litre for petrol and Rs 7.53 per litre for diesel in four rounds. Despite these hikes, the OMCs continued to incur losses on retail fuel sales.