NEW DELHI: Global oil prices rose about 1% in early trading on Wednesday after President Donald Trump announced that the US would provide insurance cover for ships in West Asia at a “reasonable price” amid the ongoing conflict, analysts said.
The modest rise followed a more than 15% jump over the past two sessions. On the social media platform Truth Social, Trump also said the US Navy would escort tankers through the Strait of Hormuz if necessary.
On the Intercontinental Exchange, the April contract for Brent crude rose over 1% during early trade to a high of $82.77 per barrel. By 7:40 a.m., it was trading at $82.08, up 0.84% from its previous close. The April contract of West Texas Intermediate on NYMEX was at $75.05, up 0.66%.
“Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf. This will be available to all Shipping Lines,” Trump wrote.
If necessary, Trump added, the US Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible. “No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD. The United States’ ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH — More actions to come. Thank you for your attention to this matter! President DONALD J. TRUMP.”
About half of India’s crude oil imports pass through the Persian Gulf and the Strait of Hormuz, making any disruption there a major concern. Ships are avoiding the strait after Iran’s Revolutionary Guard Corps (IRGC) declared on Monday that it was “closed” and warned that vessels attempting to pass would be set “ablaze.” According to Al Jazeera, at least five tankers have been damaged, two personnel killed, and around 150 ships stranded near the strait, which separates Iran and Oman.
A report by Oxford Economics on Tuesday noted: “While the Strait remains technically open, transit has effectively paused because of security risks and prohibitive insurance costs.”
Around a fifth of global oil and LNG passes through the Strait of Hormuz each day, Payne said, worth more than $1.3 billion, including Iranian exports.
The strait’s closure is particularly significant for India, which imports about 90% of its crude oil. A sustained rise in oil prices would increase India’s import bill, widen the current account deficit, and drive inflation. An increase of $1 per barrel over a year adds roughly ₹16,000 crore to India’s import bill.
Nigel Green, CEO of financial advisory firm deVere Group, said, “When oil surges with this magnitude and velocity, inflation doesn’t edge up slowly, it gathers force rapidly. Energy is embedded in every supply chain. A sustained move toward $90 Brent fundamentally alters the inflation outlook and forces a repricing of interest rate expectations.”
Mint previously reported that the Centre is closely monitoring fuel and oil stocks, as the disruption in the Strait of Hormuz unsettles global oil supply chains. State-run refiners have crude stocks sufficient for about 25 days, plus petrol and diesel for another 25 days. India also has around 25 days of cooking gas and up to 21 days of liquefied natural gas stocks.
The Ministry of Petroleum and Natural Gas has established a 24×7 control room to continuously monitor supply and stock levels across the country.