By Nikhil Dedha
New Delhi [India], March 2 : Brent crude prices have surged around 10 per cent amid escalating tensions in the Middle East following ongoing military confrontation between Iran and the United States after the killing of Iran's Supreme Leader Ayatollah Ali Khamenei.
Brent crude rose to as high as USD 78.52 per barrel, marking a sharp rise in prices as markets reacted to rising geopolitical risks in the region.
Ajay Bagga, Banking and Market Expert, toldthat the confrontation between Iran and Israel has shifted from deniable operations to overt kinetic signalling, a transition that carries global implications.
"The most critical variable is not tactical military superiority. It is energy logistics," Bagga said.
He noted that roughly 20-22 million barrels per day, about one-fifth of global oil consumption, transit through the Strait of Hormuz. Even temporary disruptions in this key chokepoint elevate insurance premiums, freight costs, and crude benchmarks.
According to him, markets are already witnessing sharp increases in war-risk insurance premiums, tanker rerouting and naval escort activity, and higher embedded logistics costs.
Outlining possible oil pricing scenarios, Bagga said that in the case of limited escalation, Brent could rise to USD 100-115 per barrel. In the event of maritime disruption, prices may move to USD 120-140, while sustained closure risk could push oil to USD 150 or higher.
On the role of OPEC, he said Saudi Arabia and the UAE hold approximately 4-5 million barrels per day of spare capacity. However, most of that supply still relies on Hormuz transit.
"Spare capacity is helpful but not frictionless," he said.
For oil-importing economies like India, Bagga said the transmission mechanism is direct. Every USD 10 increase in oil widens the current account deficit by roughly 0.4-0.5 per cent of GDP and raises CPI by 30-40 basis points.
"This is not simply a geopolitical story. It is a macroeconomic story," he said.
He added that India-specific sectors likely to face pressure include aviation, chemicals, autos, paints and oil marketing companies if price hikes are not fully passed through. Relative beneficiaries could include upstream oil companies, defence, IT due to USD hedge, and gold-linked plays.
"Geopolitical risk is no longer episodic. It is structural. 2026 marks the return of hard geopolitics," Bagga said, advising investors to stress-test portfolios for USD 120 oil, diversify geography, own real assets and hedge currencies.
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