No End Of Iran-US-Israel War Is In Sight

By Nantoo Banerjee

With the US-Israel military conflict against Iran continuing through the fourth week, severely disrupting global supply of oil and gas, petro-fuel prices may shoot up to record highs this year threatening economic stability across the world. India’s economy, which is 90 percent import dependent on oil, may be among the worst hit. Systematic attacks by the warring militaries on energy infrastructure and shipping in the region have created a massive supply shock. Market analysts see the potential for prices of oil to hit $150 or even $200 per barrel if the conflict continues to escalate. Investment banker Goldman Sachs has warned that if disruptions to oil flows from the Strait of Hormuz persist, Brent crude could surpass its 2008 all-time high of near $145–$150 per barrel.

Other investment analysts suggest that in a worst-case scenario where the conflict is prolonged, oil prices could “shoot up” to levels previously unseen. The market is extremely volatile, with observers acknowledging that while a price surge is happening, the long-term trend depends entirely on whether the war escalates or de-escalates. Driven by high industrial demand and limited domestic resources, India is the second-largest importer of crude oil and the third-largest consumer globally. Others include Japan, South Korea, Taiwan, Thailand and the European Union region. The EU is also highly dependent on imports — roughly 14 million barrels per day — making it one of the largest importing blocs in the world. France and Poland have historically displayed extreme dependence on imported oil.

Having virtually no domestic oil production, Japan relies on imports for almost 100 percent of its oil consumption, sourcing over 90 percent of its crude from West Asia. South Korea, another major Asian manufacturing powerhouse with limited domestic resources, relies heavily on foreign oil and is frequently listed among the top importers globally. Taiwan relies almost completely on foreign sources for its oil and liquefied natural gas (LNG). Thailand too depends heavily on imported oil. Although China is the world’s largest importer of oil, it is not entirely import dependent, as it maintains significant domestic production alongside its high import volumes. These economies are highly exposed to price fluctuations and supply disruptions.

Rising global oil prices threaten to potentially raise India’s import bill and inflate domestic fuel prices. Almost 50 percent of India’s oil import supplies pass through the volatile Strait of Hormuz. High crude oil import prices are bound to inflate the country’s domestic transport costs and prices of consumer goods, including food prices. Freight costs have already tripled or quadrupled, hurting exporters of textiles, gems, and pharmaceuticals. Persistent attacks on infrastructure in the West Asian war region also threaten the safety of oil supplies, raising war-risk insurance costs. Meanwhile, Indian Rupee’s exchange value is declining almost daily. As on last Friday, March 20, the exchange rate for US dollar to Indian rupees sank to 93.4513. During the past week, the exchange rate of US dollar to Indian rupees has fluctuated between a high of 93.4513 and a low of 92.1528 on March 16.

Oil prices are currently experiencing one of the most significant supply shocks in history due to the war in West Asia, creating a credible, though not guaranteed, risk that prices could challenge or exceed historical highs if the crisis is not resolved quickly. India is facing a ‘K-shaped’ economic recovery, with the oil shock disproportionately affecting smaller businesses and consumers. The country is experiencing impressive growth in sectors like technology and finance, while hospitality, MSMEs, and informal sectors continue to struggle. The current situation may make things worse. The government is implementing precautionary measures to manage energy costs, but continued hostilities in the Gulf region, particularly around the Strait of Hormuz, remain a significant risk to the economic outlook.

Despite claims by the US and Israel that they have shattered Iran’s ballistic missile bases and severely reduced Iran’s capacity to fire missiles and drones after assassination of senior Iran leaders to weaken its administrative machinery, Iran continues to heavily pound on its enemy assets. Iran seems to have enough capabilities to inflict significant damage on its Gulf neighbours, Saudi Arabia and Israel. The US and Israel claim that their combined strikes have severely eroded Iran’s drone capabilities and disrupted their command systems, aiming for complete air dominance over Iran. However, as the war progresses to the fourth week, Iran’s missile and drone capacities seem to have been far from being destroyed. Reports suggest Iran maintains a potent, evolving arsenal of over 3,000 ballistic missiles and advanced, low-cost drones, frequently upgrading them with enhanced guidance and anti-jamming capabilities.

New, deadlier Iranian drone versions feature anti-jamming antennas, increased accuracy via video links, and larger payloads. Iran is also enhancing its ballistic missile precision. Iranian missiles are being dropped throughout the region, including on Israel and US bases. Iran utilizes a robust domestic industry, with large, often underground, facilities for manufacturing, storing, and launching missiles using mobile transporters. It has deployed drones and missiles in various attacks on regional infrastructure, including the Strait of Hormuz and other sensitive areas, demonstrating a “surprising” ability to use these weapons, although many Iranian drones and missiles are successfully intercepted by advanced air defences like the Israeli Iron Dome.

The US is already feeling the financial pinch of the prolonging Iran conflict. The Pentagon has told US lawmakers that the war had cost $11.3bn in the first week alone. The conflict entered its fourth week last Saturday. The White House is seeking $200bn more for the war in Iran, with President Donald Trump saying it is needed to replenish ammunition and other supplies depleted by the conflict and previous aid to other countries, including Ukraine. The US-Israeli military offensive against Iran continues to widen as Tehran continues to escalate precision strikes on oil and gas facilities around the Gulf.

The Trump administration had no choice but to announce last Friday that it is temporarily lifting sanctions on some oil from Iran, in an attempt to ease one of the worst disruptions to the world oil market ever experienced. According to the International Maritime Organisation, over 3,000 vessels are stranded in the region. The Persian Gulf has become a massive parking lot for ships waiting for a resolution to the near-total halt of traffic through the Strait of Hormuz. And, the Iran war is unlikely to end anytime soon. Iran’s launch of two ballistic missiles toward the US-UK military base at Diego Garcia in the Indian Ocean and its latest attack on Israel’s key nuclear facility at Dimona, show the most dramatic escalations. They mark a significant shift in the ongoing West Asia conflict, highlighting both an expansion in Tehran’s strike capability and a potential widening of the theatre of confrontation. The world is worried about energy supplies and cost. (IPA Service)