Iran-Israel conflict: India ‘seriously concerned’. Will it impact crude oil prices? All eyes on markets

While Israel and allies including the US, UK and France managed to mostly foil an unprecedented attack by Iran on the Jewish state, stock markets in Israel, Saudi Arabia and elsewhere in the Middle East fell on Sunday, but only slightly.

Iran fired over 300 drones and missiles and drones against Israel on Saturday night. Almost all were intercepted before they reached Israeli airspace and there were no fatalities reported. A 10-year-old girl in Israel was badly injured by falling shrapnel, while an army base was lightly damaged.

Iran launched the attack over a suspected Israeli strike on its consulate in Syria on April 1 that killed top Revolutionary Guards commanders and followed months of clashes between Israel and Iran’s regional allies, triggered by the war in Gaza.

Bloomberg reported that oil prices rose in the wake of the Syria strike, with Brent climbing above $90 a barrel and analysts saying it could reach $100 on a direct conflict between Iran and Israel. The Israeli shekel weakened and neared its weakest level this year.

India is also keeping a close watch on the increasing tension between Iran and Israel due to the potential economic repercussions for New Delhi. With over 80 per cent of its crude oil requirements imported, any escalation could significantly affect India’s economy. A surge in oil prices would impact the country’s growth, drive up inflationary pressures, disrupt the balance of trade and current account deficit, consequently exerting pressure on the rupee.

India said it is concerned over escalating hostilities between the two sides that threaten regional peace and security. In its reaction, India called for immediate de-escalation of the situation and return to the path of diplomacy. New Delhi said its embassies in the region are in close touch with the Indian community in the region.

“We are seriously concerned at the escalation of hostilities between Israel and Iran which threatens the peace and security in the region,” the Ministry of External Affairs (MEA) said. The MEA said India is closely monitoring the evolving situation in West Asia.

“It is vital that security and stability are maintained in the region,” it added.

India, being one of the largest oil consumers and importers globally, faces heightened vulnerability to such disruptions. While the initial impact of the conflict on India’s trade with Israel remained minimal, further escalation could imperil India’s oil supply, given its heavy dependence on imports from the Middle East. To address this concern, the Indian government strategically increased crude oil imports from Russia, constituting over 35 per cent of crude imports in 2023, in order to mitigate the impact of the Russia-Ukraine conflict on oil supplies.

The escalating tensions between Iran and Israel have heightened geopolitical concerns and the potential to disrupt global oil markets. This situation is under close observation by nations worldwide due to its implications for regional stability and energy security.

Reuters reported that oil prices are expected to rise on Monday, April15, after Iran’s attack on Israel over the weekend, but further gains may depend on how Israel and the West choose to retaliate.

Concern of a response from Iran to the strike on its embassy compound in Damascus supported oil last week and helped send global benchmark Brent crude on Friday to $92.18 a barrel, the highest since October.

It settled that day up 71 cents at $90.45, while US West Texas Intermediate crude futures rose 64 cents to $85.66. Trading is closed on Sunday, Reuters added.

“It is only reasonable to expect stronger prices when trading resumes,” said Tamas Varga of oil broker PVM. “Having said that, there has been no impact on production so far and Iran has said that ‘the matter can be deemed concluded’.

“However fierce and painful the initial market reaction will be, the rally could prove to be short-lived unless supply from the region is materially disrupted.”

“Oil prices might spike at the opening as this is the first time Iran has struck Israel from its territory,” said UBS analyst Giovanni Staunovo.

Iran has steeply raised oil exports – its main sources of revenue – under the Joe Biden administration. Exports were severely reduced under Biden’s predecessor Donald Trump, who will face Biden in a presidential election rematch in November.

The Biden administration has argued it is not encouraging Iran to raise exports and is enforcing sanctions.

Indian mission in Israel issues fresh advisory

On Sunday, the Indian mission in Israel issued a fresh “important advisory” for its nationals after attacks on the Jewish State by Iran with hundreds of projectiles, advising them to stay calm and adhere to safety protocols.

“In light of the recent events in the region, all Indian nationals in Israel are advised to stay calm and adhere to the safety protocols issued by the local authorities,” the Indian mission said in the “important advisory” advisory posted on its social media handles.

“The Embassy is closely monitoring the situation and it is in touch with the Israeli authorities and Indian community members to ensure the safety of all our nationals,” it added.

It also urged Indian nationals to register with the embassy at a given link.

The Indian embassy had also issued an advisory on Friday amid growing speculation of a retaliatory attack by Iran advising its nationals to “avoid unnecessary travel, remain calm and follow safety guidelines issued by the local authorities”.

It was the first time that the Islamic Republic launched an attack on the Jewish State from its own soil.

Despite the barrage of projectiles fired on Israel, none of the countries have taken any steps so far to evacuate their nationals, even though some of them, including the US, have issued advisories.

Israel Defence Forces (IDF) spokesperson said that 99 per cent of the roughly 330 missiles and drones launched by Iran were intercepted, but that “the threat is not over”.

Iran has warned Israel of a larger attack on its territory should it retaliate, adding that US bases would be targeted if Washington backs any Israeli military action against Iran.