The ongoing conflict between Israel and Iran-backed Hezbollah is fast threatening to escalate into a wider regional conflict. Besides the humanitarian aspect, what is worrying India equally, if not more, is how it will affect its oil imports and prices across the globe.
According to ANI, Prime Minister Narendra Modi, on Friday, held a meeting of the cabinet committee on security to discuss the regional conflict in the Middle East and its possible repercussions for India, which was attended by seniors ministers and officials.
Will Iran strike Israel's oil refineries and gas fields?
With trade ties with both Iran—which is one of India's key oil exporters—and Israel, India stands to lose from both sides if the conflict between these two countries continue. Before Iran's missile attack on Israel, Brent crude—the international benchmark—was trading at $71 a barrel. But, it rose to nearly $76 a barrel post the attack.
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Despite oil imports from Russia, India still depends heavily on the Middle East for oil and gas imports, with Iraq, Saudi Arabia, the UAE, and Kuwait being the key players. According to Economic Times, the share of Russian oil in India's imports fell to approximately 36 per cent in August, from 44 per cent in July. However, the proportion of oil from the Middle East in India's crude imports rose to 44.6 per cent in August from 40.3 per cent in the same time period.
Also, India relies on Qatar for nearly half of its liquefied natural gas (LNG) needs.
Iran is a major oil producer, producing two million barrels a day, which is, reportedly, about 2 per cent of world supply. Despite the sanctions on Iran's production and sale, there is no denying that any dip in Iran's oil production will affect oil supply globally.
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With the threat of an Israeli attack on Iran’s main oil export terminal on Kharg Island in the Persian Gulf, hanging like the proverbial sword of Damocles, India cannot afford to breathe easy. Also, in the face of such an attack, Iran may choose to retaliate with targeted strikes on oil installations in neighbouring states, which will complicate matters further.
An all-out war between Israel and Iran, with Hezbollah and the Houthis in Yemen, too, getting involved, will put India's energy supply chains at great risk. For instance, critical oil shipping routes, including the Red Sea and the Strait of Hormuz, could be disrupted, which could, in turn, increase cost and delivery time.