Sustained high crude oil prices to hurt downstream players

The Iran-Israel conflict entered a more intense phase with the US carrying out airstrikes on Iran's nuclear facilities over the weekend.

- DEVANGSHU DATTA

The heightened tensions have led to further spikes in crude prices with Brent crossing the $81 per barrel or bbl mark. The fears centre around the possibility of supply routes being interdicted and hence, supply being disrupted, rather than Iranian oil being taken off the market.

Iran's exports are mainly to China and the quantum of Iranian exports could be compensated for by Saudi Arabia and other OPEC-plus nations. Net-net, even with Iranian supply off the market, there could in theory be over-supply given weak global demand.

There is however, a significant possibility that the Straits of Hormuz could be blocked by Iran. Or, if the US intervenes to keep the Straits open, this narrow passage could turn into a war zone, leading to supply disruptions anyway.

Around 20 per cent of the world's oil and a large proportion of its gas passes through the Straits.