Iran attack on Israel: Dangerous escalation could spell dire implications for India’s oil supply

Iran launched armed drones and missiles against Israel. (Image credits: Reuters)

The war in Gaza has been going on for seven months. The recent exchanges between Israel and Iran brings the danger closer to India. After the Israeli attack on the Iranian Consulate in Damascus on 1st April, Iranian retaliation was expected. The Iranian Supreme Leader in his Eid message likened it to an attack on Iranian soil and said that Israel must be, and will be punished. The Iranian counter-strike against Israel early morning today, took the form of a barrage of drones and missiles launched directly from Iran against Israel. Though most of them were intercepted, an Israeli airforce base in the south was reportedly hit. The Iranian Mission to the UN said that so far as Iran is concerned, the present round is concluded. The Israeli Cabinet is meeting to decide the next course of Israeli action. A meeting of the UN Security Council has been called. The exchange has taken place against the background of the seven-month-old Gaza war. Will there be a wider conflagration or the conflict be contained?

Implications for India

India has excellent relations with the Arab states, Iran and Israel. If the conflict spreads to the Gulf, this could have a dramatic impact on oil prices. Twenty percent of the world's crude oil supply passes through the Hormuz Strait. For India, the implications are dire. Nearly 60 percent of Indian crude supply traditionally comes from the Gulf region. There has been a surge in oil purchases from Russia. In the long term, however, the Gulf region would remain the most important source of crude supply to India. In addition, Qatar is a major supplier of LNG to India.

Indian crude oil basket saw a sharp increase of 7.27 percent during the past month. It is worth noting that a dollar increase in the price of a barrel of crude oil increases India’s import bill by more than Rs 13,000 crores on an annual basis. There has been an increase of more than 6 dollars in the past month as the Indian crude oil basket went up from $ 84.93 to $ 91.11 per barrel per day.

Iran Captures Vessel with Indian Crew

Iran has seized an MSC vessel Aries in the Hormuz Strait. This is a container ship that was en route to Nhava Shiva Port in India. The seizure is justified on the ground that one of the owners is an Israeli. While this raises the temperature, this is unlike the tanker war of the 80s when the attempt was to choke off the oil supply. The crew of Aries includes 17 Indians. While MEA has taken up the matter with the Iranian side, there should be no immediate cause for worry for their safety. India is not belligerent and has excellent relations with Iran.

India Issues Travel Advisory

India has issued a travel advisory to Indians not to travel to Israel or Iran. While this precaution in the prevailing situation is understandable, it must be remembered that there are nearly 7.5 million Indians in the Gulf region. If the Gaza war continues, or Israel-Iran tensions escalate, this will affect Indians in the wider region.

The Gulf region accounts for the large Indian diaspora mentioned above. India has a growing relationship with Israel in defense and hi-tech sectors. India has civilizational ties with Iran, which provides us connectivity to Afghanistan, Central Asia, and Russia through the Chabahar port and International North-South Transit Corridor (INSTC). Making choices between friends is difficult. India is trusted by all; it could play a role as a peacemaker.

What the Escalation Implies?

The Gaza war has not involved a direct confrontation between the major players. A war between Israel and Iran has the potential to draw America into the conflict. Iran has also shown restraint. The retaliation was not directed against American facilities or bases in the region, despite the fact that the US has overtly committed itself to Israel’s defense. A major factor for restraint in the situation is the understanding between Saudi Arabia and Iran. This prevented the war from spreading to the Gulf region, which accounts for a major part of the world oil supply.

The situation remains extremely fraught as no end to the Gaza war seems to be in sight. Continued war in Gaza puts pressure on the moderate Arab governments to take sides between Israel and Palestine. If the Israel-Iran conflict continues, they will be under pressure to choose between their neighbour to the east and the US. This has also immensely complicated President Biden’s choices at a time US is involved in supporting Ukraine and managing increased tensions with China in the Far East. This is a recipe for a perfect storm.

(DP Srivastava is a former Ambassador to Iran and ex-Director, Gail.)

Views are personal and do not represent the stand of this publication.