Hormuz on the brink: a US-Iran ceasefire steadies oil markets — for now

The Strait of Hormuz, a narrow waterway between Iran and Oman, is the transit point for roughly one-fifth of global oil and a large share of liquefied natural gas from Gulf producers. Iran has repeatedly threatened to close it during past confrontations with the US; even a partial disruption would force tankers onto far longer routes around Africa, adding days of transit time and significant freight costs. The weekend's exchange of strikes — the most direct US-Iran military confrontation in years — showed how quickly the situation can escalate from a diplomatic framework to live fire.

For India, the stakes are especially high. India is one of the world's largest crude importers, sourcing a significant share of its oil from Gulf producers whose exports pass through Hormuz. The spike in crude prices during the West Asia conflict has already raised wholesale inflation and input costs for Indian manufacturers, delaying the relief that businesses had hoped to see from earlier oil-price easing, according to Mint's Emerging Markets Tracker. A sustained Hormuz disruption would widen India's current-account deficit, pressure the rupee (which rose 20 paise to 94.25 against the dollar on Monday, partly on ceasefire relief), and complicate the RBI's rate path by reigniting imported inflation.

Export controls as geopolitical leverage have become China's preferred tool of economic coercion, following its earlier restrictions on rare-earth exports and gallium/germanium curbs targeting Western semiconductor supply chains. By extending the blacklist to government defence institutes, China is signalling that it views Japan's entire defence-industrial ecosystem — not just individual companies — as a legitimate target. This mirrors the logic of US entity-list actions against Chinese tech firms, suggesting a deepening tit-for-tat dynamic in the technology and security domains.

For India, the China-Japan escalation carries a mixed read. India has its own fraught economic relationship with China and has been diversifying supply chains partly to reduce dependence on Chinese inputs. A further deterioration in Sino-Japanese relations could accelerate the reorientation of Japanese manufacturing investment toward friendlier jurisdictions — including India — in sectors like electronics, defence components and clean energy. However, any broader risk-off move in Asian markets triggered by the escalation would also weigh on FII/FPI flows into Indian equities and the rupee.

The Tehrik-i-Taliban Pakistan (TTP), which operates from Afghan soil, has dramatically intensified attacks inside Pakistan over the past two years, killing hundreds of security personnel. Islamabad has repeatedly demanded that the Taliban suppress TTP sanctuaries; Kabul has consistently refused, claiming it cannot control all territory. This latest strike — one of the most significant Pakistani military actions inside Afghanistan in recent memory — suggests Islamabad has concluded that diplomatic pressure has failed and is willing to accept the diplomatic cost of unilateral action.

For India, the Pakistan-Afghanistan flare-up adds a layer of instability to its already complex western-flank security environment. A prolonged Pakistan-Taliban confrontation could divert Pakistani military attention and resources, but it also risks generating refugee flows and ungoverned spaces that militant groups exploit. India's trade and connectivity ambitions in Central Asia — including via the Chabahar port route through Iran and Afghanistan — would be set back further by any sustained deterioration in Afghan security.

The EU's planned scrap-export restrictions are driven by its own circular economy agenda — Brussels wants to keep high-quality recyclable materials within the EU to feed its green-steel and low-carbon aluminium industries, reducing reliance on virgin ore. From the EU's perspective, this is an industrial policy tool, not a trade weapon. But for large scrap-importing nations like India, Turkey and others, the effect is the same as an export ban: tighter global supply and higher prices for a key manufacturing input.

India's steel sector is one of the world's largest and is central to the government's infrastructure and manufacturing push. Higher scrap costs would raise the cost of construction steel, with knock-on effects for capital expenditure across the economy. The dispute also sets a precedent for how the India-EU Free Trade Agreement — still being implemented — handles conflicts between the EU's green industrial policy and India's development interests, a fault line that is likely to recur across sectors from critical minerals to carbon border adjustments.