Brent Crude Jumps 2% Above $102 As Strait Of Hormuz Attacks Raise Supply Fears

Brent crude prices surged 2% above $102 per barrel on Thursday, propelled by heightened worries over supply disruptions following recent attacks on shipping in the Middle East. US crude West Texas Intermediate also rose 1.8% to $89.9 per barrel. The attacks on vessels in the strategic Strait of Hormuz have raised fears of potential interruptions to oil transportation, which could impact shipping operations, insurance costs and global energy supplies.

Despite Gulf producers maintaining exports and September shipments recovering, continued security threats could deter vessels from navigating the crucial waterway. The International Energy Agency has stepped up the release of oil from strategic reserves to alleviate supply pressures, but these emergency stock releases cannot substitute for lost production capacity, making their effectiveness contingent on the length of disruptions.

US crude inventories decreased by roughly 3.2 million barrels last week, surpassing analysts' expectations of a 1.7-million-barrel reduction. Additionally, US distillate inventories, encompassing diesel and heating oil, fell below normal seasonal levels, further fueling concerns over fuel availability. The rising crude prices pose inflation risks for India, potentially weakening the rupee and widening the current account deficit due to the country's heavy reliance on imported crude.

Higher energy costs could also inflate transportation, logistics, and manufacturing expenses, exacerbating domestic inflationary pressures and constraining corporate profit margins. The Reserve Bank of India recently increased its benchmark repo rate by 25 basis points to 5.5%, shifting its monetary policy stance from neutral to calibrated tightening in response to inflation concerns.

Indian equity investors will closely monitor oil prices, foreign fund flows, currency movements, and global bond yields for signs of broader market pressure.