Oil prices spike on geopolitical worries—how long can uncertainty keep prices elevated?

Crude oil prices have surged again after fresh geopolitical tensions around the Strait of Hormuz, raising concerns over supply disruptions and price volatility. The latest trigger came after talks between the United States and Iran failed to reach a breakthrough, reviving fears of escalation in the region.

In a conversation with Zee Business, former Chairman and Managing Director (CMD) of Hindustan Petroleum Corporation Limited (HPCL) Mukesh Kumar Surana said the recent spike in crude prices is largely driven by uncertainty and speculation rather than immediate supply shocks.

Talks fail, markets react instantly

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Surana noted that expectations from the negotiations were already low, as both sides showed little convergence in their positions even before the talks began. “Both sides believe they are in a stronger position. That made a resolution unlikely,” he said.

Despite the lack of a concrete outcome, the fact that discussions took place is seen as a minor positive. However, markets reacted sharply to the failure, with crude oil prices moving above $100 per barrel again.

He explained that current price movements are largely “news-based,” with traders factoring in geopolitical risk premiums. Crude has seen sharp swings in recent weeks, moving from around $119 to $95 and then back above $100.

Price outlook: Range-bound unless escalation

According to Surana, if the situation remains unchanged, crude prices are likely to hover in the $100–105 per barrel range. However, any direct military action or escalation could push prices back towards the earlier peak of $120.

“The upside depends on whether tensions translate into real disruption on the ground,” he said.

Supply concerns more critical than prices

While prices remain volatile, the bigger concern is supply disruption. Around 20 million barrels per day of crude oil pass through the Strait of Hormuz, making it one of the most critical energy chokepoints globally.

Surana warned that even partial disruption can tighten global supply. Alternative routes, such as pipelines and shipments via the Red Sea, can only offset a portion of the lost supply.

“There is already some impact. LNG supply has also been affected, especially with disruptions linked to Qatar,” he said.
Limited relief from alternative supply routes

Countries like Saudi Arabia and the United Arab Emirates are trying to increase output and reroute supplies through east-west pipelines. However, these alternatives have limited capacity.

Surana noted that while pipeline capacity may go up to around 7 million barrels per day, it cannot fully replace the volumes moving through Hormuz.

“There will always be a gap. At best, 7–8 million barrels can be managed through alternate routes,” he said, adding that risks in the Red Sea region remain elevated.

Inventory drawdowns and long-term risks

If tensions persist, countries may increasingly rely on strategic reserves. But prolonged disruptions could deplete inventories and create deeper supply shortages.

“The longer this situation continues, the more pressure it will create on global energy markets,” Surana said.

India’s position: Stable for now

From an India perspective, Surana said the situation is under control for now. The government has managed to maintain steady supplies of petrol, diesel, and LPG despite global disruptions.

“India has handled this phase well. There is no major shortage, and prices have largely remained stable compared to other countries,” he said.

However, some restrictions were imposed on industrial gas supply to prioritise household consumption. These are now being gradually eased.

India has also diversified sourcing, importing energy from countries such as the US and others, while using policy tools like excise duty cuts to manage the domestic impact.

What lies ahead

Surana cautioned that while India is currently comfortable in terms of supply, a prolonged crisis could pose challenges.
“Short term is manageable. But if this turns into a long-drawn situation, supply stress could emerge,” he said.

For now, crude oil markets remain highly sensitive to geopolitical headlines. The next move will depend on whether tensions ease or escalate further around the Strait of Hormuz.