In life, we take many things for granted. For instance – water resource. We make a borewell and keep consuming it and sometimes wasting it. Only when the supply gets disrupted, we understand its value. We scramble to get things done – like ‘buying’ water at a cost.
Right now,
the ongoing Oil Crisis is one such disruption. When unprecedent things happen, when things go out of control, and when
things may take years to normalize – we understand our limitations. That exposes
the fragility of economy.
While most
of us may be aware of the way the US-Iran war unfolded, following is a simple
flow of events to understand the ripple effect:
· 28th Feb 2026 : US-Israel
launch: Operation EPIC FURY, killing Iran’s supreme leader Ali
Khamenei, many of his family members and senior officials of the regime.
· Iran's
response was calculated. Rather than engage in a conventional war it could not
win, Tehran weaponised geography. It deployed drones, missiles, and naval mines
to seal the Strait of Hormuz, and then it began hitting energy infrastructure
across the Gulf.
· Within
the first week, Iran’s drones struck Qatar's Ras Laffan LNG facility- responsible
for nearly 20 percent of the world's liquefied natural gas exports. Saudi
Arabia's Ras Tanura refinery, the kingdom's largest, was closed after a fire
caused by intercepted drone debris. The UAE's ADNOC shut refineries. Kuwait
Petroleum Corporation and Bahrain's Bapco followed. Gulf countries have been
forced to cut at least 10 million barrels per day of production.
· On 18th March, Israel hit
Iran's South Pars gas field - the single largest natural gas deposit on earth,
shared between Iran and Qatar. Iran retaliated within hours, launching missiles
at Qatar's Ras Laffan again, causing what QatarEnergy described as extensive
damage. Iran also targeted UAE’s Habshan gas complex, the Bab oilfield, LNG facilities
in Kuwait, Bahrain and Saudi.
· In
total, six countries in the Gulf have now had their energy infrastructure
directly attacked or shut down: Iran, Qatar, Saudi Arabia, the UAE, Kuwait, and
Bahrain.
· Strait
of Hormuz: Before 28th Feb, 100 oil tankers crossed every day. In past
3 weeks a total of 21 tankers have managed to cross.
Global
impact:
· As a result of war, Oil supply has fallen by 8 million barrels per day. That 7.5%.
· So far, Asian LNG spot prices more than doubled to over 25 dollars per million BTU. European natural gas futures rose over 50 percent. Jet fuel prices are up 83 percent, according to the International Air Transport Association. Urea fertiliser prices have risen 35 percent. Helium, essential for semiconductor manufacturing, has doubled in price since Qatar, the source of a third of the world's helium supply, shut production.
· More than 30 countries are affected. South Korea imposed fuel caps for the first time in nearly three decades. Japan began releasing oil from its national reserves. Bangladesh stationed troops at oil depots and closed universities to conserve fuel. The Philippines moved government offices to a four-day work week. Nepal started rationing cooking gas. Vietnam has less than 20 days of oil reserves remaining. Thailand's tourist arrivals fell 9 percent in the first week of March alone, with hotels reporting occupancy as low as 10 percent. Smaller energy importing economies, including the Philippines, Pakistan, and Sri Lanka, would face the sharpest macroeconomic damage, as inflation, currency depreciation, and widening deficits hit all at once.
Impact on
India:
· 50% of this and 75% of LNG pass through strait of Hormuz.
· 22 Indian flagged vessels carrying 2.2 million metric tonnes of critical energy cargo, including LPG, LNG, and crude oil, were stranded in the strait as of 18 March. Only two vessels each carrying 46,000 metric tonnes of LNG managed to reach India - that too in exchange of emergency medicines etc.
· With rising crude price, our current account deficit spirals up. A US$1 rise in crude oil prices increases India’s annual import bill by approximately US$1.5 billion to US$2 billion (approx. ₹12,000–₹16,000 crore). This boosts the Current Account Deficit (CAD), fuels inflation, weakens the Rupee, and negatively impacts downstream oil marketing companies.
· Agricultural exports to Gulf countries, including rice and bananas, have been severely disrupted.
· Around 93 lakh Indians work in the Middle East, and 30 percent of India's total remittances (over 50 billion dollars annually) flows from the region.
What Next ? :
· There could be sporadic instances of terror threats / attacks across the globe – increasing the cost of defense and security checks. This could affect normalcy.
· Oil and LNG production may not resume immediately. It depends on field's age and the nature of the shutdown. LNG facilities involve sub-zero cryogenic equipment that must be restarted gradually to avoid thermal shock and damage.
In 1973, the Arab oil embargo was a political tool that could be lifted with a political decision. In 2026, even after a ceasefire, the physical, financial, and logistical wreckage will take far longer to clear.
What the US thought could be a cake walk like the way they handled Venezuelan crisis could turn out to be a costly affair – affecting not just them, but the entire world. They would not have imagined the kind of retaliation from Iran. They would not have imagined that their key NATO allies not aligning with them. And worse what should have been a Israel-Iran war has turned out to be a Arab-Iran war. As Saudi Arabia's foreign minister said on 19 March: the trust that held the Gulf's energy system together has been completely shattered. The ripple effect could take longer than you imagine to normalize. And what was taken for granted - be it oil or peace - has become a luxury now.
