India's Energy Supply at Risk Amid West-Asia Tensions: Goldman Sachs

A Goldman Sachs report warns that the West-Asia conflict threatens global energy supplies via the Strait of Hormuz. With one-fifth of the world's oil at risk, major Asian importers like India face significant supply chain disruptions.

Escalating tensions due to the West-Asia conflict involving Iran have heightened risks to global energy supply chains, particularly around the strategic Strait of Hormuz, raising concerns for major Asian importers, including India, according to a report by Goldman Sachs.

Strait of Hormuz: A Critical Energy Chokepoint

The report said roughly one-fifth of the world's oil and a significant share of liquefied natural gas (LNG) shipments normally pass through the strait, making the region critical for countries dependent on energy imports.

It warned that tanker traffic through the strait has already shown signs of disruption, with shipping firms, oil producers and insurers adopting a cautious approach following reports of damaged vessels in the region.

Nearly 20 million barrels per day of oil supply and about 19 per cent of global LNG trade typically transit through the waterway, making it one of the most important chokepoints in the global energy supply chain.

Markets Begin Pricing in Geopolitical Risk

According to the research note, markets have already begun pricing in geopolitical risk. Oil markets currently reflect an estimated USD 18 per barrel risk premium, equivalent to the price impact expected if flows through the strait were completely halted for about a month, even after accounting for some pipeline capacity that could bypass the route.

Assessing the Impact of Potential Disruptions

Goldman Sachs said that while no confirmed damage to regional oil infrastructure has been reported so far, disruptions to maritime shipping alone could significantly affect global supply chains.

Approximately 16 million barrels per day of oil flows could be exposed in the event of a full closure of the strait, even after accounting for alternative pipeline routes.

Global LNG Supplies at Risk

The risks extend beyond crude oil. Roughly 80 million tonnes per year of LNG exports, largely from Qatar, move through the strait, and a sustained disruption could sharply tighten global gas markets. In such a scenario, European gas benchmark prices could potentially surge to levels seen during the 2022 energy crisis, the report said.

Shipping Slowdowns and Rising Costs

Recent developments linked to the Iran conflict have already slowed tanker movements and triggered sharp increases in shipping insurance premiums and freight rates, with some vessels avoiding the region entirely, raising fears of broader supply shortages.

Vulnerability of Asian Importers and Global Outlook

Energy supply chains in Asia are particularly vulnerable, as countries including China, India, Japan and South Korea account for the majority of oil and LNG imports passing through the strait.

Goldman Sachs noted that although global oil inventories and spare production capacity could provide some short-term buffer, prolonged disruptions to shipping routes in the Gulf could drive significant volatility in global energy markets and raise prices across oil, gas and refined products.

Officials and market participants are now closely monitoring tanker traffic through the Strait of Hormuz and diplomatic or military signals from the United States, Iran and Gulf countries to determine whether the disruption remains temporary or evolves into a broader energy supply shock. (ANI)

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