Last week, there was a huge fluctuation in the crude oil prices in the global market. Amidst the US-Iran war, there was a huge jump of 20% in crude oil, will petrol become expensive now? American crude oil i.e. WTI crude is hovering around $84 per barrel, while during this entire week, its prices have registered a huge jump of more than $8. This is the first time after the month of March that there has been such a sharp rise in the oil prices. You will be surprised to know that during the month of July alone, there has been a huge increase of about 20 percent in the prices of American crude oil, which has created panic in the markets across the world.
IMF’s big warning and experts’ estimates
International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned the world that the severe oil crisis in the Middle East could push the global economy deeper into recession. However, she also said that if the strategically important Strait of Hormuz is reopened soon, its negative impacts could be significantly mitigated.
On the other hand, Jay Hatfield, CEO of Infrastructure Capital Management, says that as long as the war continues, WTI crude prices will remain around $80 to $100 per barrel. However, if the war ends in the near future, prices could fall back to $50 to $60 per barrel.
The Strait of Hormuz has become the main focus of the US-Iran war.
Despite the ongoing US-Iranian conflict, oil supplies through the Strait of Hormuz have remained largely unchanged in recent days. This strait handles approximately 20 percent of the world’s oil trade, making any disruption there a direct and profound impact on the global economy.
Saudi Arabia’s new initiative and the open challenge of the Houthi rebels
Meanwhile, Saudi Arabia has held serious discussions with representatives from 43 different countries about forming a new coalition to protect shipping in the Red Sea and surrounding waters. This move is seen as a strong response to the blockade imposed on the country last week by Iran-backed Houthi rebels.
Meanwhile, Houthi leader Abdulmalik al-Houthi has openly warned that any attack from Saudi Arabia will be met with an even more dangerous response. The rebel group has also recently claimed responsibility for attacks on several oil facilities.
The crisis deepened in the Black Sea and affected the supply
In addition to these tensions in the Middle East, concerns have also grown about disruptions to oil supplies in the Black Sea. Loading operations at the terminal considered crucial for Kazakhstan’s crude oil exports were halted once again this week. This month alone, there have been a spate of attacks on Caspian Pipeline Consortium facilities or vessels transiting through them, the most since the start of the Russia-Ukraine war in 2022.
US President Trump faces a major dilemma
US President Donald Trump, having launched a war with Israel in late February to retaliate against Iran’s nuclear program, is now in a difficult position. He faces only two options: either escalate the war in response to Iran’s attacks, or focus his full attention on calming the severe turmoil in the global energy market.
Bloomberg rightly quotes Caroline Kissane, associate dean of New York University’s Center for Global Affairs, as saying that it remains to be seen whether this dispute will escalate further and whether the US will take any major retaliatory action as threatened by President Trump, or whether the matter will remain limited to relatively small-scale mutual attacks.
Its direct and heavy impact on the pocket of the common man
These rising oil prices have a direct and serious impact on the common man’s pocket. Skyrocketing petrol and diesel prices increase transportation costs within the country, resulting in the price rise of everything from essential food items to everyday necessities. If crude oil prices surpass $100 per barrel in the coming days, the burden of inflation will increase further for oil-importing countries like India.