Crude oil prices hit the key psychological mark of $100 a barrel last week, the first time since Russia’s invasion of Ukraine in 2022. Despite efforts by the US administration to reassure markets, conflicts continue in the oil-rich Middle East.
Iran has warned that oil prices will rise to $200 per barrel if the conflict continues. Iran’s new supreme leader and son of Ayatollah Ali Khamenei, Mojtaba Khamenei, has described the Strait of Hormuz as a strategic “pressure tool” that should remain closed during a war. In a message broadcast on state television, he also warned that US military bases across the region could face attacks as Iran retaliates for war casualties.
Oil prices have risen amid concerns that the Strait of Hormuz could remain blocked, disrupting global energy trade. The 33-kilometer-long waterway that connects the Persian Gulf and the Gulf of Oman transports more than 20% of the world’s oil and gas, making it one of the most important hubs in the world’s energy markets.
What lies ahead for oil prices
Global crude oil prices could rise to $120 per barrel in the near term and possibly reach $150 per barrel if the war drags on for more than a month and geopolitical tensions in West Asia remain high, said Kaynath Chinwala, senior vice president at Kotak Securities.
“Any long-term disruption of this trade route would be good for crude oil and bad for other commodities, as it increases inflationary concerns and could lower interest rates,” Chinawalla said.
A report by Nawama also stated that if the Strait of Hormuz remains closed for four to eight weeks, the price of oil will rise to $150 per barrel. However, such extremely high price levels can eventually lead to demand erosion and trigger alternative supply responses. Asian economies may suffer from the disruption, the report said, as nearly 13 million barrels of oil per day (mbpd) pass through the Strait of Hormuz to countries including China, India, Japan and South Korea.
Meanwhile, Systematics Institute Equities said global crude markets had entered a period of heightened volatility over the past two weeks, with the elimination of oil and gas assets in West Asia adding a strong geopolitical risk premium to prices.
“Tanker freight rates and insurance premiums for vessels passing through high-risk zones have also increased, significantly raising procurement costs,” the brokerage said.
How Indian stock markets react
The Nifty 50 fell 5.3% last week as the Iran-Israel conflict, weakening rupee, continued FII inflows and concerns over oil supply weighed on sentiment. While Systematix expects near-term volatility to affect valuations, it prefers Reliance Industries, Petronet LNG, Deep Industries and Gulf Oil as long-term bets.
According to Vinod Nair, head of research at Geojet Investments, market direction in the coming weeks will largely depend on developments in the Iran conflict and oil price movements, given inflation, corporate conditions, current account deficit and RBI policy flexibility.
“A steady dollar and higher US bond yields may keep FIIs selective and volatility high. Better value opportunities may arise in fundamentally resilient and domestically driven sectors, while energy-sensitive sectors may remain under pressure if crude prices remain high,” he said.
He added that domestic institutional buying has provided some cushion, but a sustained market recovery is likely to require clear signs of geopolitical easing, stability in crude prices and better clarity on oil supply dynamics.
Siddhartha Khemka, head of wealth management research at Motilal Oswal Financial Services, said market volatility is likely to continue as geopolitical tensions disrupt the energy market and keep risk sentiment fragile.
“India has seen a significant correction in 2026 amid global uncertainty, resulting in significant market value erosion in the sector,” Khemka said.
The Nifty 50 is down over 11% so far this year, while the Nifty Midcap and Smallcap indices are down around 10% each. In March alone, the Nifty fell around 8%, marking its biggest monthly decline since the pandemic-driven crash of March 2020.
On the currency front, the Indian rupee recently fell to a record low of Rs 92.45 against the US dollar as rising energy prices and risk sentiment fueled concerns about India’s current account deficit, as the country imports nearly 88% of its crude oil needs.
Rising oil prices have also heightened concerns about inflationary pressures, expanding external balances and strained corporate conditions, prompting investors to reduce equity exposure and move towards safer assets.
“Price-sensitive and cyclical sectors such as banking, financial services and automobiles have seen significant selling pressure,” Khemka added.
Accordingly, markets are expected to remain highly sensitive to developments in the West Asian conflict, movements in crude oil prices and trends in foreign fund flows.
“Continued outflows and higher oil prices keep sentiment cautious, while any signs of easing geopolitical tensions may comfort markets,” he said.
(Disclaimer: The suggestions, recommendations, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)
The price of oil
