The escalating war involving Iran, the US, and Israel has triggered the biggest oil supply shock. Tanker traffic through the vital Strait of Hormuz has plummeted from ~20 million barrels per day to almost nothing, as ships avoid the danger zone.

Gulf producers like Saudi Arabia, Iraq, UAE, Kuwait, and Qatar have slashed output by at least 10 million barrels daily because storage is full and exports can’t leave.

Meanwhile, fewer flights and LPG issues could cut it by ~1 million bpd. To ease the crisis, the IEA coordinated a record release of 400 million barrels from emergency stocks. Global inventories are still high, offering a short-term buffer, but without quick resumption of Hormuz flows, things could worsen fast.

Despite the announcement, oil prices climbed back above $90 a barrel, with markets warning that the reserves offer no structural fix unless safe passage through the Strait of Hormuz is restored completely.

India imports around 85–90% of its crude oil requirement, which means domestic fuel prices are highly sensitive to global benchmarks such as Brent Crude Oil and West Texas Intermediate (WTI).

When crude rises sharply—as it has this week due to Middle East tensions and supply fears—oil marketing companies typically face higher input costs. If prices remain elevated for long, those costs eventually feed into retail petrol and diesel prices.

What may happen in the next few weeks

1. Short-term: Prices may stay unchanged for now: State-run retailers such as Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum often absorb temporary spikes. If crude volatility lasts only a few days, pump prices may remain stable.

2. If crude stays near or above $100: Sustained levels above $100 per barrel could start putting pressure on fuel retailers. Historically, prolonged rallies at such levels have led to gradual price revisions.

3. Government intervention is possible: Before major elections or during inflation spikes, the government has sometimes cut excise duty or asked oil companies to delay hikes to cushion consumers.

4. Inflation risk: Higher fuel costs also raise transportation expenses, which can push up prices of food and other essentials—an issue closely monitored by the Reserve Bank of India.

If crude stays near $100–110 per barrel for several weeks, analysts typically estimate petrol and diesel prices could rise by roughly ₹2–₹6 per litre, depending on taxes and exchange rate movements.

For now, the oil spike is a warning signal rather than an immediate price hike. The key factor will be whether geopolitical tensions in the Middle East continue to disrupt supply routes like the Strait of Hormuz.