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Critical Topics and Their Significance for the UPSC CSE Examination on June 19, 2025

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Why are oil prices rising amid Iran-Israel war?

For Preliminary Examination: Current events of national and international significance

For Mains Examination: GS II - International relations

Context:

Escalating tensions between Iran and Israel sent oil prices spiralling upwards with fears mounting about a potential disruption in oil supplies globally. The benchmark Brent crude futures had soared about 9% on June 13 to $75.65 for a barrel after it hit an intraday high of $78.50/barrel – a near five-month high.

Read about:

Iran-Israel history

Gulf of Oman and Arabian Sea

Key takeaways:

• Rising tensions between Iran and Israel caused a sharp spike in global oil prices due to fears of a possible disruption in supply chains. On June 13, Brent crude futures climbed nearly 9% to reach $75.65 per barrel, after hitting an intraday high of $78.50—a level not seen in nearly five months.
• However, some relief came on June 16, when media reports indicated that Iran had asked Qatar, Saudi Arabia, and Oman to appeal to U.S. President Donald Trump to encourage Israel to accept a ceasefire. By the evening of June 17, Brent crude was still trading 2.4% higher than on Monday, standing at $74.98 per barrel.
• The primary cause of the price surge lies in Iran's repeated threats to shut down the Strait of Hormuz, a crucial maritime chokepoint connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. Chokepoints are narrow passages along busy shipping routes that play a vital role in the global oil trade.
• Even a temporary closure can disrupt supply chains, reduce shipping traffic, and increase insurance and transport costs—all of which contribute to higher energy prices. While alternative routes do exist, they often involve longer transit times and additional costs.
• From a broader trade perspective, Pankaj Chadha, Chairman of the Engineering Exports Promotion Council of India
• According to an analysis by the U.S. Energy Information Administration (EIA), the Strait of Hormuz is wide and deep enough to accommodate even the largest oil tankers.
• In 2024, about 20 million barrels of oil passed through the strait each day—roughly one-fifth of the global petroleum liquids consumption.
• The International Energy Agency (IEA) also noted that the strait acts as a major export route for around a quarter of the global oil supply, including exports from major producers like Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, and Iran.
• EIA estimates show that in 2024, 84% of crude oil and condensates, along with 83% of liquefied natural gas, transported through the strait were destined for Asian markets.
• Looking ahead, the IEA's June 2025 report suggests that the oil market appears to be adequately supplied—provided no major disruptions occur. It projects oil demand to rise by 720,000 barrels per day, while supply is expected to increase by 1.8 million barrels per day, reaching a total of 104.9 million barrels per day.
• Moreover, preliminary data indicates that since February, global oil inventories have been growing at an average of 1 million barrels per da