The Iran-Israel Conflict between Iran and Israel was not stopping and now America has also entered into it. The United States has an air strike on Iran’s three nuclear sites, which has made global conditions even more worrisome. Meanwhile, the danger of proving the truth of those speculation is also looming, in which it is said that Iran can shut down the Strait of Hormuz, which is one of the most important oil routes for the whole world and this step can cause a big crisis in front of the world. Let us know why it is necessary to have hormuz and how it will be affected?
Us increased concern over Iran due to air strike
First of all, let’s talk about the conditions of the American entry in the ongoing battle between Iran-Israel, so let us know that the US is now openly seen against Iran in this war and has an air strike on three big nuclear sites. These include Fordo, Natanj and Isfahan and have given a statement about it by US President Donald Trump.
However, describing the move as the strength of American military force, he has also said that it is time for peace. But, this war does not seem to stop anymore and this has increased the concern of the world. UN General Secretary Antonio Guterres said, “Expressing deep concern over American military action, he said that it is a direct threat to US Strike international peace and security in a stressed atmosphere.”
26% oil trade from ‘Straight of Hormuz’
Amid the war with Israel, Iran has already been warning to shut down the Hormuz Strait or Strait of Hormuz. Although the experts were not telling the move as easy, but now after the US attack with Israel, the apprehension has increased that Iran can shut down the hormuz. Let me tell you that this is a major sea oil route, which is controlled by Iran and this is the only way through which oil is supplied from the Gulf countries. According to reports, 26 percent of the world’s crude oil trade is done through this path and if it is interrupted or it is closed, then its effect can be seen clearly on all European countries including America as well as India.
As mentioned, Hormuz is important for the transportation of a large part of the water -creating global crude oil business, which makes it one of the most important sea oil routes strategically in the world. Any obstacle in this route can prove to be a panic in the world oil markets and there can be a strong increase in the Crude Oil Price. Recently, an Iranian MP Ali Yajdikhh had said in open terms that if the US joins the war with Iran in support of Israel, then the hormuz can stop to disrupt crude oil trade to pressurize.
How will hormuz affect?
Now let’s talk about how the straw of hormuz can become a global crisis, so this oil route included in the world’s most important shipping route is about 96 miles long and 21 miles wide in its narrow place. There are two miles wide two shipping lanes in both its directions, where Iran can stop. This hormuz connects the Gulf of the Persian Persia to the Gulf of Oman and the Arabian Sea. If Iran takes these steps, then there will be a strong increase in crude oil prices, because the operating costs of shipping companies will increase.
The reason for this is that due to the closure of this route, the ships will have to change their path, which will be longer and expensive, due to which the freight will increase from the cost to delivery time. In a report that came last week, Norbert Rooker, an economist and research head of Julius Bayer, also said that geopolitical tension has returned and crude oil prices have also risen. Meanwhile, the concerns of oil supply are definitely reaching the peak.
However, some experts and economists do not work with the fact that Iran can take steps to close Strait of Hormuz. However, these apprehensions have definitely received force after the American attack. If you look at the prices of crude oil, Bren Crude Oil Price has crossed $ 77 per barrel, while the WTI Crude Price is trading around $ 75 per barrel. Recently, JP Morgan had predicted the rise in crude oil prices to $ 120 per barrel, while now many major banks and analysts including many cities and Deuts banks have feared it to reach $ 120-130 per barrel after deepening the war.
Risk of inflation in India
According to reports, about 37 lakh barrels of crude are consumed in India every day and the country imports about 80 percent of its need. In such a situation, if there is any kind of obstruction in the supply of crude oil, then it can prove to be a big trouble for India as well as other countries. This is because oil marketing companies decide the price of petrol-diesel rate only on the basis of crude price, freight charge, refinery cost.
Apart from this, excise duty, VAT and dealer commission also adds to its prices until reaching the common customer. If the prices of petrol and diesel are increased due to expensive crude oil, then it will increase the transportation cost and due to this, the increase in the prices of essential goods can increase the risk of inflation for the general public.