Impact of Israel's Attack on Iran: Risks to India

Oil Supply and Price Implications

• Israel's recent attack on Iran, and subsequent retaliations, have raised global tensions, significantly impacting oil prices.
• Global oil prices surged by approximately 8% in one day due to the conflict.
• India's Oil Import: India imports about 80% of its oil requirements. Although India imports negligible volumes directly from Iran, global price hikes affect its oil import costs.
• Strait of Hormuz: Around 20% of global oil passes through this strait, which is between Iran and the Arabian Peninsula. Disruptions here could impact shipments from Iraq, Saudi Arabia, and the UAE, key suppliers to India.

Impact on Indian Exports

• The conflict could lead to closures of the Suez Canal and Red Sea routes, escalating costs and time for Indian exports.
• Export rerouting via the Cape of Good Hope could add 15-20 days and $500-$1,000 per container, leading to a 40-50% cost increase.

Market Reactions and Analysis

• Oil prices, though temporarily elevated, are expected to normalize due to market resilience, ample storage, and growing exports outside the Middle East.

Gold Market Surge

• The price of gold soared to over Rs 1 lakh per 10 grams as investors sought safe havens amidst the geopolitical uncertainty.
• Amit Jain highlights this trend as part of a broader uptrend driven by central bank accumulation, declining fiat confidence, and long-term inflation concerns.