Global oil markets are heading into a volatile phase as escalating tensions in the Middle East raise fears of supply disruptions across one of the world’s most important energy corridors, with analysts warning that crude oil prices could rise sharply if the conflict deepens.Khamenei’s death, which was earlier confirmed by Iranian state media, sparked warnings of strong retaliation by Tehran. US President Donald Trump said the 86-year-old leader was killed on the first day of what he described as massive joint air strikes.
After the killing of Khamenei, Owaisi warns that a long war may lead to higher oil prices
The escalation has intensified concerns about the Strait of Hormuz, a narrow passage linking the Persian Gulf to the Gulf of Oman and the Arabian Sea, through which more than 20% of the world’s oil supplies pass.
Intense missile activity near the region has heightened concerns about supply constraints, pushing oil prices higher.US West Texas Intermediate crude rose 3.19% to $67.29 a barrel, while Brent crude reached $72.87 on Friday, even before the weekend surge exacerbated geopolitical risks.
Barclays points to oil risks at $100
On Saturday, Barclays raised its forecast for Brent crude to $100 a barrel, warning that markets may face severe disruption risks.Oil markets may have to confront their worst fears on Monday.
The bank said in a report: “In light of the current situation, we believe that Brent may reach $100 (per barrel), as the market faces the risk of a possible supply disruption amid the escalating security situation in the Middle East.”The revised forecast came in the wake of initial US-Israeli strikes on Iran and Tehran’s retaliation, with tensions rising after the death of Iranian Supreme Leader Ayatollah Ali Khamenei.Ali Fayez, who heads the Iran Project at the International Crisis Group, said Iran’s geographic location makes the situation particularly sensitive. “Even limited disruption could lead to higher energy prices, fuel inflation, and rocking global markets,” he said in a post on X.
The familiar oil crisis pattern
Equirus Securities said that oil markets historically react sharply during geopolitical crises before stabilizing.“The pattern is consistent: oil first overreacts, locking in a geopolitical risk premium, then gradually adjusts as trade flows redirect and fundamentals assert themselves.
ET quoted the brokerage firm as saying that the real forecasting challenge is not in predicting the initial rise but in estimating how long the disruption will last and the premiums involved.She cited the Russia-Ukraine war as an example, where the price of crude oil briefly rose above $120 a barrel before falling as supply routes were adjusted.However, the brokerage warned that the risks could turn structural if shipping through the Strait of Hormuz is threatened.“Even the risks of partial disruption could include a geopolitical premium of $20 to $40 per barrel, reopening the path towards $95 to $110, beyond the mechanical impact of Iran’s barrels alone,” she added.
India faces inflation risks
High oil prices pose immediate macroeconomic challenges for India, which is a major importer of crude oil.Rising energy costs could lead to widening external imbalances, said Manoranjan Sharma, chief economist at credit ratings firm Infomerx. “Higher import costs are likely to widen the current account deficit and increase pressure on the fiscal deficit through increased support commitments,” he said.Madhavi Arora, chief economist at Emkay Global Institutional Equities, added that the tensions could also lead to shipping disruption and increased freight and insurance costs even without a full blockade.“As per our preliminary checks, India’s supply of crude oil and LNG is largely intact, and India has reserves in the form of diversified imports, strategic reserves and operating stocks, which help absorb short-term shocks,” it said.She added that if tensions calm and OPEC+ production rises, the overall economic damage may remain under control. “But if the situation returns to normal with OPEC+ also signaling a sharp increase in production (0.4 million barrels per day), and oil does not rise and fall below $70 per barrel, the overall impact could be contained,” Arora said.
Impact of the market on Dalal Street
On Dalal Street, the focus is expected to remain on oil marketing companies as crude oil prices rise. Refinery stocks could benefit from higher oil prices, while tire and paint companies may face pressure because petroleum derivatives make up a major portion of their input costs.With geopolitical risks now driving sentiment, analysts say the path of crude oil prices will depend largely on whether unrest around the Strait of Hormuz intensifies or global supply routes continue to operate normally.(Disclaimer: Recommendations, opinions regarding stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times Of India)
