Global oil markets are entering a volatile phase as escalating tensions in the Middle East raise fears of supply disruption through one of the world’s most critical energy corridors, with analysts warning crude prices could rise sharply if the conflict deepens.Khamenei’s death, which was previously confirmed by Iranian state media, prompted warnings of strong retaliation from Tehran. US President Donald Trump said the 86-year-old leader was killed on the first day of what he described as massive joint airstrikes.
The escalation has heightened concerns around the Strait of Hormuz, a narrow passage connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea through which more than 20% of global oil supplies pass. Heavy rocket activity near the region has heightened fears of supply constraints, sending oil prices higher.US WTI crude rose 3.19% to $67.29 per barrel, while Brent crude reached $72.87 on Friday, before the weekend’s escalation amplified geopolitical risks.
Barclays signals a $100 oil risk
Barclays on Saturday raised its forecast for Brent crude to $100 a barrel as it warned markets could face serious disruption risks.“Oil markets may face their worst fears on Monday. As things stand, we think Brent could reach $100 (per barrel) as the market grapples with the threat of a potential supply disruption amid a spiraling security situation in the Middle East,” the bank said in a report.The revised view followed initial US and Israeli attacks on Iran and retaliatory measures by Tehran, with tensions further rising following the reported death of Iranian Supreme Leader Ayatollah Ali Khamenei.Ali Vaez, head of the Iran Project at the International Crisis Group, said Iran’s geographic location makes the situation particularly sensitive. “Even limited disruption could raise energy prices, fuel inflation and roil global markets,” he said in a post on X.
The well-known oil crisis pattern
Equirus Securities said oil markets historically react sharply during geopolitical crises before stabilizing.“The pattern is consistent: oil first overreacts, integrates a geopolitical risk premium, and then gradually adjusts as trade flows redirect and fundamentals reassert themselves. The real challenge in forecasting is not predicting the initial peak, but estimating how long the disruption and embedded premium will last,” the broker noted, ET quoted.It cited the war between Russia and Ukraine as an example, where crude oil briefly rose above $120 a barrel before retreating as supply routes adjusted.However, the brokerage warned that the risks could become structural if shipping through the Strait of Hormuz were compromised.“Even the risk of partial disruption could imply a geopolitical premium of $20 to $40 per barrel, reopening a path to $95 to $110+, well beyond the mechanical impact of Iranian barrels alone,” the report said.
India faces inflation risks
Higher oil prices pose immediate macroeconomic challenges for India, a major crude oil importer.Manoranjan Sharma, chief economist at Infomerics Ratings, said higher energy costs could exacerbate external imbalances. “High import costs are likely to widen the current account deficit and put further pressure on the fiscal deficit through higher subsidy obligations,” he said.Madhavi Arora, chief economist at Emkay Global Institutional Equities, added that tensions could also disrupt shipping and raise freight and insurance costs even without a full blockade.“According to our preliminary checks, India’s crude and LNG supplies are largely intact and India has buffers in the form of diversified imports, strategic reserves and operational stockpiles, which will help absorb short-term shocks,” she said.She added that if tensions ease and OPEC+ output rises, macroeconomic damage could be limited. “However, if the situation normalizes, with OPEC+ also pointing to a sharp increase in production (0.4 million barrels per day), and oil prices do not spike and fall below $70 per barrel, the macro impact could be limited,” Arora said.
Market impact on Dalal Street
On Dalal Street, oil marketing companies are expected to remain in focus as crude oil prices rise. Refinery stocks could benefit from rising oil prices, while tire and paint companies could come under pressure as petroleum derivatives make up a major part of their input costs.With geopolitical risks driving sentiment, analysts say the trajectory of crude oil prices will largely depend on whether disruptions around the Strait of Hormuz increase or whether global supply routes continue to function normally.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These views do not represent the views of The Times of India)
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