Why Crude Oil Prices Are Rising As War Risks Threaten Global Supply

Crude oil prices surged sharply after rising tensions between US and Iran triggered fears of supply disruption. Brent crude crossed $109/barrel, while WTI touched $111. Global events, attacks and rising food prices, are adding to the pressure.

Crude oil prices rise sharply in global market

Global oil prices saw a big increase on Thursday. Brent crude rose by around 8 percent to reach about 109.24 dollars per barrel. At the same time, US West Texas Intermediate (WTI) crude was trading at around 111.54 dollars per barrel. Crude oil markets on April 3 remained closed on the occasion of Good Friday.

WTI crude has seen a rise of nearly 11.94 percent compared to last week. However, Brent crude showed a slight drop of 3.14 percent over the same period, according to Barron's.

A warning of possible military action by Donald Trump has created fear in the market. Investors are worried that oil supply could be affected in the coming weeks.

These sudden changes have surprised many in the market.

Why the Strait of Hormuz matters

The biggest concern right now is the Strait of Hormuz. This narrow sea route is one of the most important oil passages in the world.

Around 20 percent of the world’s oil supply passes through this route. If this path is blocked or disturbed, it can affect oil supply across the globe.

So far, there is no clear plan on how this route will remain safe if tensions increase further.

War situation adds to uncertainty

The conflict in West Asia has now entered its fifth week. Attacks and counter-attacks have created fear among traders and governments.

There are reports of drone attacks and fires at major energy sites. In Abu Dhabi, a gas facility had to stop work due to debris from an intercepted attack. In Kuwait, a refinery also caught fire after a drone strike.

Such incidents increase the risk of supply disruption.

Global impact begins to show

The effect of rising oil prices is already visible in many countries.

In Bangladesh, office and shop timings have been reduced to save energy. The country depends heavily on imported oil and gas.

In Australia, petrol and diesel shortages have been reported in several areas. The government has asked people to fill fuel in advance.

In Thailand, the Prime Minister has blamed traders for hoarding fuel and causing price rise.

Shipping and supply concerns grow

There are also concerns about shipping through the Strait of Hormuz. Recently, a cargo ship linked to a French company managed to pass through safely.

However, it was one of the first such movements after attacks on ships started earlier this year.

Any disruption in shipping could affect global supply chains.

Stock markets react to oil surge

Stock markets around the world have reacted to these developments.

Asian markets had fallen earlier due to uncertainty, but Tokyo shares later recovered. Markets in Europe and the US also improved before the long holiday weekend.

Still, investors remain cautious as the situation is unclear.

Food prices and travel costs may rise

Rising oil prices also affect other sectors. According to the UN’s Food and Agriculture Organization, food prices increased by 2.4 percent in March. This is mainly due to higher fuel and fertiliser costs.

Airlines are also worried. In Japan, airlines are considering increasing fuel charges if oil prices stay high.

Countries take different steps

Different countries are trying to manage the situation in their own way.

Italy has extended tax cuts on fuel to give some relief to people. Ukraine has even offered to help keep the Strait of Hormuz open, based on its experience in the Black Sea.

In New Zealand, more people are buying electric vehicles as fuel prices rise.

What it means for India

For India, this situation is important. The country imports a large part of its oil needs. If crude oil prices stay high, petrol and diesel prices may not come down anytime soon. This can affect daily expenses and transport costs.

The rise in crude oil prices is mainly due to fear and uncertainty in global markets. Tensions between major countries and risks to key oil routes are pushing prices up.

Until the situation improves, people around the world may have to deal with higher fuel costs.

(With AFP inputs)