Ripple effect of Oil Crisis:

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:

·       28^th 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 18^th 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 28^th Feb, 100 oil tankers crossed every day. In past 3 weeks a total of 21 tankers have managed to cross.

Global impact:

·       World consumes about 105 million barrels per day.
·       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:

·       India imports 90% of its Crude oil.
·       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 ? :

With majority of IRAN’s top brass wiped out, many expect the war to come to an end soon. But life will not be the same again.
·       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.