Oil prices extended their sharp rally on Thursday, with Brent crude climbing above $105 per barrel as escalating conflict in West Asia and fresh threats to key maritime trade routes raised fears of tighter global energy supplies. The surge is expected to increase pressure on India’s crude import bill, fuel retailers, inflation outlook and government finances.
The November Brent crude contract on the Intercontinental Exchange was trading at $105.82 per barrel at around 9 pm IST, up 4.55% from the previous close. The October West Texas Intermediate, or WTI, crude contract on the New York Mercantile Exchange rose 4.42% to $100.30 per barrel. Brent had crossed the $100 level on Wednesday for the first time in six weeks and moved closer to a four-month high during Thursday’s rally.
The latest jump followed reports that Yemen’s Houthi militia had captured the Red Sea city of Mocha, located near the strategically important Bab-al-Mandeb strait. The development is seen as a fresh risk to Saudi crude shipments and other commercial vessels moving through the corridor. The Bab-al-Mandeb route connects the Red Sea with the Gulf of Aden and is a critical passage for global energy trade. Any prolonged disruption could worsen supply concerns already linked to restricted shipping activity around the Strait of Hormuz.
India is particularly exposed to a sustained rise in crude oil prices because it imports about 90% of its oil requirements. According to Bank of Baroda estimates, a persistent $1 increase in crude oil prices can raise India’s annual oil import bill by about ₹18,000 crore. India’s annual oil import expenditure is estimated at around $120 billion and accounts for roughly 17% to 25% of its total merchandise imports.
The pressure on India’s oil bill had already increased before Brent crossed $105. Crude oil imports during April-July rose 56% year-on-year to $63.37 billion, representing more than half of the country’s oil import spending in the preceding financial year. Higher crude prices can widen India’s current account deficit, add pressure on the rupee and increase transport and manufacturing costs across the economy.
State-owned oil marketing companies are also facing margin pressure. ICRA estimates that, based on the average Indian crude basket price in September, marketing margins are negative by about ₹5 per litre on petrol and ₹23 per litre on diesel. Domestic LPG sales are estimated to be generating under-recoveries of nearly ₹200 per cylinder.
The market will now closely watch developments in the conflict zone, shipping activity at Hormuz and Bab-al-Mandeb, and the response of major oil-producing countries. A prolonged disruption could keep crude prices elevated and intensify inflationary risks for oil-importing nations such as India.