Due to increasing tension between America and Iran, crude oil prices have increased rapidly and once again reached $91 per barrel. The blockade of the Strait of Hormuz had already disrupted global fuel supplies, and now Yemen’s Houthi rebels have announced a blockade targeting Saudi oil ships. Due to this, the shipping route of the Red Sea is in danger.
Why did the Houthis target Saudi Arabia?
Houthi rebels are a group that is directly supported by Iran. Amid the ongoing conflict between the US and Iran – in which the US has blocked the movement of oil and gas tankers through Iranian ports – the Houthis have retaliated by targeting Saudi Arabia, America’s main ally in the Gulf region. Using drones and anti-ship cruise missiles, the Houthis have effectively blocked Saudi Aramco oil tankers from passing through the Bab al-Mandab strait at the mouth of the Red Sea.
What effect will this have?
Just as the Strait of Hormuz supports 20% of the world’s energy supply, the route handles about 12% to 15% of global maritime trade and about 10% of global oil supply. If shipping companies abandon the Red Sea route and take the ‘Cape of Good Hope’ route – i.e. around the African continent – due to fears of Houthi attacks, the journey time will increase from 14 to 30 days. Longer routes mean higher fuel costs, and consequently, higher marine insurance premiums for ships.
crisis for india
India imports large quantities of crude oil from Russia; These shipments reach India via the Black Sea and Suez Canal, passing through the Red Sea. Although the Houthis have not claimed responsibility for the attacks on Russian ships, the ongoing tension in the region will definitely have some impact.
Another concern for India is that exports such as textiles, tea, basmati rice and engineering goods – which are sent to Europe and the US via the Red Sea and Suez Canal – will be affected. Rerouting these shipments will increase costs for Indian exporters, making Indian products more expensive and less competitive in foreign markets.
Will the prices of petrol and diesel increase? If the prices of crude oil in the international market remain at $91 or more for a long time, then its impact on the prices of petrol and diesel in India may be visible in the first week of next month. Prices may rise by ₹3-5 per litre; However, no official statement has come yet on this matter.