Yemen’s Iran-backed Houthis have opened a new front in the ongoing war in West Asia. Saudi Arabia has faced constant attacks from the Houthis this week, with the group not only capturing a key port on the Red Sea but also seizing strategic islands and making its biggest territorial gains in years along the Bab el-Mandeb Strait. These developments are likely to impact global oil supply.
These two developments – Houthis gaining control of Red Sea corridor and attack on oil pipeline – have raised concerns about a potential disruption to Saudi Arabia’s oil exports.
Experts say that a rise in crude oil prices will have an adverse effect on India, as it is likely to lead to higher inflation and put pressure on the rupee. “For India, crude oil remains the most immediate external risk. If the shipping route is not restored to normalcy, this could impact India adversly in the week to come.
By early June, Saudi Arabia had more than doubled oil exports from the Red Sea port at the pipeline’s western end to more than 5 million barrels per day, according to the International Energy Agency, as cited in a PTI report. Ongoing attacks amid the widening Middle East war could send energy prices even higher after a week that saw the price of Brent crude surge back above $100 a barrel, according to a Reuters report. As Iran faces sanctions, India’s oil imports from Saudi Arabia jumped by 32 per cent after US sanctions against Iran came into effect, making Riyadh the second-largest crude supplier to India, according to Arab News.
Any renewed rise in crude prices, particularly if disruptions to Middle East oil flows intensify, could add to inflationary pressures, widen the import bill, weigh on the rupee and squeeze corporate margins, Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, a Research Analyst firm, said, according to PTI.
