Commodities● Neutral
Hormuz Deadlock Lifts Oil 6%, India Braces for $5-10B Import Hit
Crude oil settled 1.67% higher at $88.52 after Iran said no deal reopening Hormuz. India faces a $5-10 billion import bill hike if it cuts Russian crude, an economist warned.
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Crude oil settled at $88.52 a barrel on Friday, up 1.67%, and Brent posted a near-6% weekly gain after talks between Iran and the United States failed to break a months-long deadlock over the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi said on Saturday that an agreement with Oman would not mean the strait reopens. "We have not yet made a decision to resume negotiations with the US," he wrote on Telegram.
For India, the disruption cuts directly into an already stretched import bill. The country buys roughly half its oil from Russia, taking advantage of steep discounts. Washington has proposed a sanctions bill that would impose tariffs of up to 100% on major buyers of Russian energy. If India cuts its Russian crude purchases by 50%, the annual oil import bill could rise by $5-10 billion, according to Santosh Mehrotra, an economist and former UN advisor, as quoted by ANI. Mehrotra said the reduction would also push up inflation by about 0.3 percentage point and put pressure on the rupee and the current account deficit, which has run at 0.6-0.7% of GDP in recent years. "In today's date, we have to keep in mind that our dependence on Russia is about 50% for the oil supply," he said.