The fallout of US-Israeli strikes on Iran on energy markets is likely to increase short-term volatility rather than long-term fundamentals of the energy market. Iran has limited capability to sustain a blockade of the Strait of Hormuz, given the US military presence in the Persian Gulf, and Tehran will isolate itself further by missile strikes on its energy-exporting neighbours. Disruption to Iran’s oil exports will have a marginal impact on global crude prices, which may be magnified by the closure of the shipping lanes. Natural gas faces greater volatility due to low stockpiles in importing nations.
India is particularly susceptible to diversion of the energy trade through the Persian Gulf because of its dependence on imports from the region. It is also affected by rising shipping costs on account of its maritime energy imports. Retail prices have, however, remained frozen for an…
