From $120 to $80: How Global Oil Markets Absorbed the Shock

While the ongoing conflict in West Asia has spilt over into the Red Sea, disrupting energy flows, India and global markets have witnessed relatively limited panic. Analysts attribute this resilience to more diversified energy supplies, higher strategic reserves, and the availability of spare production capacity outside the Middle East.

How Brent Crude Has Moved Through the Conflict

Brent crude moved from below $60 a barrel last December to above $120 in March, but remained well below the extreme forecasts of $150 to $200. By August, prices had eased to around $80 a barrel as markets responded to signs of diplomatic progress.

Praveen Rai, Director at Grant Thornton Bharat, said markets have reacted more calmly because investors have become more confident in the global energy system’s ability to absorb shocks.

“Unlike earlier crises, there is greater spare production capacity outside the Middle East, higher strategic petroleum reserves, and a more diversified supplier base, including the US, Brazil, Guyana and parts of Africa.”

— Praveen Rai, Director, Grant Thornton Bharat

Three Structural Shifts That Have Made Global Oil Markets More Resilient

Here are the structural changes that have made the current environment more resilient than previous conflict-driven price spikes:

• Supplier diversification: Crude supply has become more diversified, with Brazil, Guyana, and Argentina together accounting for about half of this year’s global production growth, according to the US Energy Information Administration
• LNG flexibility: Global LNG trade reached a record 437 million tonnes in 2025, and the United States overtook Qatar as the largest exporter at 110.7 million tonnes. The rapid expansion of LNG trade has created greater flexibility to redirect cargoes
• Strategic reserves: The International Energy Agency’s 400-million-barrel emergency release and the recovery in Gulf exports have reinforced confidence that the current disruption, while significant, is likely temporary

How India Cut Its Dependence on Single Oil Suppliers and Shipping Routes

For India specifically, diversification of energy supplies has significantly improved energy resilience, analysts said. The country now sources crude oil, LNG, and LPG from a much broader range of regions than it did a decade ago, reducing dependence on any single supplier or shipping corridor.

India has expanded its crude sourcing to 41 countries from 27 earlier, including Brazil, the US, Venezuela, Nigeria, and Oman. Higher renewable energy penetration and greater use of alternative fuels have also reduced overall dependence on hydrocarbons in several sectors.

“As a result, supply disruptions in one region are increasingly offset through alternative suppliers, inventories or fuel switching, helping limit the impact on global energy markets.”

— Praveen Rai, Grant Thornton Bharat

Strait of Hormuz and Bab el-Mandeb: Why These Routes Are the Biggest Risk

Despite the improved resilience, analysts cautioned that critical energy transit routes, such as the Strait of Hormuz or the Bab el-Mandeb Strait, remain the biggest risk to energy markets. A substantial share of global oil and LNG trade flows through these two corridors.

The latest transit data shows how quickly activity can drop:

• Crossings through the Strait of Hormuz fell to 15 on August 3, down from a revised 19 a day earlier, per S&P Global MINT and S&P Global Commodities at Sea
• Traffic through the Bab el-Mandeb Strait dropped to 21 transits on August 3 from 36 the previous day, the lowest daily level since June 1 during the current reporting period

Analysts and industry executives flagged two scenarios that could change the current picture sharply:

• If attacks spread to production or export infrastructure in major producing countries
• If multiple supply disruptions occur simultaneously across regions

“The key disruptive factor is time. The longer the conflict drags on, the more energy reserves are drawn down before they can be replenished, leading to a systemic shortfall.”

— Majumdar

Rai added further dimensions to the risk:

• Attacks on vessels and reduced tanker availability can make supplies commercially inaccessible even when production continues
• Higher war-risk insurance adds a cost layer that limits market access
• The gradual depletion of spare production capacity and inventories reduces the market’s shock-absorbing ability over time

In such a scenario, even relatively small supply losses could trigger disproportionately large price increases and heightened volatility across global energy markets, he added.

Final Outlook

Source: Moneycontrol