War Will Erupt In Middle East If Iran Blocks Strait Of Hormuz, Says Narendra Taneja
More than supply, India is concerned about oil prices, Narendra Taneja, a global energy expert, said.
In case Iran becomes successful in blocking the Strait of Hormuz, there will be a full-blown war in the Middle East, as per Narendra Taneja, a global energy expert. If other countries get involved, it will be no surprise, he said.
Iran's parliament has approved to close the Strait of Hormuz. Now, the final decision is with the country’s Supreme National Security Council.
In case the closure is permitted, there will likely be a major escalation, Taneja said in an interview with NDTV Profit.
The moment Iran applies closure to Strait of Hormuz, US ships and Israel ships will be in action. It will not be a surprise if other countries join in, he said.
US Secretary of State Marco Rubio has already warned in case Iran blocks Strait of Hormuz, they should be ready for the consequences, Taneja noted.
According to him, Brent crude may jump over $100 a barrel if the closure takes effect. US cannot afford brent price touching those levels as President Donald Trump is actually aiming to bring brent price down to $60 a barrel, said Taneja.
He noted that so far there is no disruption from supply side for oil while the demand is not rising. Oil is a geopolitical commodity. Hence any tension from the geopolitical point of view affects oil prices' trajectory, he explained.
Closure of Strait of Hormuz poses danger not only for oil prices but also for the entire global economy, added Taneja.
A far as the markets are concerned, the initial movement will likely be a knee-jerk reaction. There will be an upward pressure on oil prices, which is negative. It is most likely that this situation will escalate further, said Santosh Rao, Head - Research, Partner at Manhattan Venture Partner.
Israel and Iran war was already known and markets had started to price in implications. However, US's bombing at Iran's nuclear sites has widened the conflict. It is going to have a whole new ramifications across the board globally, Rao said.
What Does It Mean For India?
India consumes 5.5 million barrels of oil everyday, being the third largest consumer of oil. 89% of this consumption is imported. More than supply, India is tensed about the price, explained Taneja.
While the economy is sensitive to the crude oil prices, India has diversified its source of crude successfully. Its dependence on Saudi Arabia, Kuwait, and entire Middle East is quite substantial, Taneja said.
A closure will bring severe impact on India as freight charges will rise subsequently making exports and imports expensive, SC Ralhan, president, Federation of Indian Exporting Organisations, said.
