Oil price can become another constraining factor for the Indian economy later in the year and upset growth calculations.

A sudden arrest of a British tanker by Iran which was carrying oil through the Straits of Hormuz in the Persian Gulf has sent shivers down the international oil markets and over the current day prices have gone up by 2.2 percent. Earlier unidentified attacks on oil tankers had led to a scare.

The Straits of Hormuz in the Persian Gulf is one of the most important seaways for global oil movement. Entire Qatar, Kuwait, Bahrain, and Iran’s own oil passes through these narrow straits. On an average day, one-fifth of the global oil movement goes through these sea passages.

There have been a series of incidents in the Gulf ever since the US upped its ante over the Iran Nuclear Deal and rubbished the deal as being ineffective in controlling Iran’s actions over acquiring nuclear weapons. 

This week’s Iran arrest of the British oil tanker is a response to what had happened to an Iran oil tanker off the coast of the British territory of Gibraltar. A week back Britain had detained an Iran oil tanker on the ground that it was carrying oil to Syria.

The Syrian conflicts over the years had created a global diplomatic chasm, with the US and Western Europe ranged against the current Syrian regime and Russia and Iran supporting the present rulers and President Assad. The US had imposed sanctions against supplies to the country.

US has been urging that Britain and the EU should impose sanctions on Syria. Iran said that the British arrest of its vessel was illegal because so far EU never implemented “secondary sanctions”. So Iran angrily responded to UK action saying that Britain had created a grave situation and there would be responses to UK action from Iran.

It is not unnatural to think that the UK had yielded to US pressures on pitting the pitch over Iran and acted in haste. Since Iran’s arrest of the British oil tanker in Striats of Hormuz, it is realising that Britain no longer ruled the waves and it is in no position to defend even British vessels in the Persian Gulf areas.

The complicated global security and geopolitical issues would surely start influencing the oil prices and the course of price could go northwards as a result.  More so because this has coincided with supply disruptions in Venezuela and Libya from where oil despatches have gone down. If the global economy now remains on course as suggested in the latest IMF forecasts then the situation could further aggravate in the oil markets.

As if the situation could not further be worsened, the United States on Wednesday announced blacklisting one of China’s biggest public sector oil trader under sanctions. The Chinese operator is reported to have millions of barrels of oil in various Chinese ports.

The USA has alleged that the Chinese oil trader has been buying oil from Iran and stockpiled in ships in the country’s ports. Warned by these developments, diplomatic efforts have been doubled up and efforts are on to bring down temperatures. But nevertheless, there is nervousness about the Middle East situation and its impact on oil markets.

India, as an importer of more than 80 percent of its annual requirements, will be facing further slippages in its fiscal calculations in 2019-20.