Why crude oil prices are rising again and what US sanctions on Iran mean for India

Crude oil prices climbed more than 3% on Wednesday after fresh military strikes between the United States and Iran renewed fears of tighter global supplies and disruptions in the Strait of Hormuz.

Brent crude, the international benchmark, rose 3.2% to $76.54 a barrel in early trade, while US benchmark West Texas Intermediate gained 3.2% to $72.72 a barrel.

The rally came after prices had eased in recent days to levels seen before the Iran conflict erupted in late February, as traders had expected a fragile ceasefire to hold.

Why are oil prices rising again?

Two developments have triggered the latest rally.

First, Iran launched missiles and drones at US military facilities in Bahrain and Kuwait after American forces struck more than 80 military targets across Iran overnight. The renewed exchange has raised fears that the conflict could widen further across the Gulf and disrupt the tariff through the vital Strait of Hormuz.

Second, the United States withdrew temporary sanctions relief that had allowed Iran to openly export crude oil following the ceasefire reached in June.

The US Treasury's Office of Foreign Assets Control revoked General License X, which had been issued on June 21 and temporarily allowed the production, delivery and sale of Iranian crude oil, petroleum products and petrochemicals under specified conditions.

""The Department of the Treasury's Office of Foreign Assets Control (OFAC) is revoking Iran-related General License X and issuing Iran-related General License X1, for the "Revocation and Wind Down of June 21, 2026 Authorization for the Production, Delivery and Sale of Crude Oil, Petrochemical Products, and Petroleum Products of Iranian Origin." Effective July 7, 2026, General License X, dated June 21, 2026, is replaced and superseded in its entirety by this General License X1," the statement said.

The earlier relaxation had enabled Iran to openly market its crude in US dollars for the first time in years, helping increase exports and contributing to lower global oil prices over recent weeks.

With the licence withdrawn, buyers have until July 17 to complete transactions already underway before restrictions take full effect.

The US administration has not specified how long the renewed sanctions will remain in force or what conditions Iran must meet for relief to be restored.

A US official said sanctions relief would depend on Iran demonstrating "good behaviour", adding that Tehran's actions in the Strait of Hormuz were "wholly unacceptable" and would have consequences.

Why do sanctions matter?

Iran is one of the world's major oil producers.

The move raises the possibility that Iranian oil exports could decline again, which will reduce supplies available to global buyers.

Oil markets typically react quickly to events that threaten production or transportation, even before any actual disruption occurs, because traders build a "risk premium" into prices.

What does it mean for India?

India imports more than 85% of its crude oil requirement, making it highly sensitive to changes in international oil prices.

The average price of the Indian basket of crude oil stood at $114.48 per barrel in April, $106.23 in May and $83.22 in June.

It has since declined sharply to $70.76 per barrel as on July 7.

Consumers in India were hoping for a relief in petrol and diesel prices in the coming weeks if the lower crude prices sustained.

Union Petroleum and Natural Gas Minister Hardeep Singh Puri recently explained that oil companies typically procure crude oil around two months in advance and are currently processing cargoes bought in April and early May, when international prices were substantially higher.

Asked whether the decline in crude prices would translate into lower petrol and diesel prices, Puri said it would be a "legitimate question" if international oil prices stayed low for the next few weeks.

With prices rising again, consumers may have to wait longer for any relief in fuel prices.