Global oil markets are heading into 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 that crude prices could surge sharply if the conflict deepens.
Khamenei's death, confirmed by Iranian state media earlier, triggered warnings about 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 intensified concerns around the Strait of Hormuz, a narrow passage connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, through which more than 20% of global oil supply moves. Heavy missile activity near the region has heightened fears of supply constraints, pushing oil prices higher.
US WTI crude rose 3.19% to $67.29 per barrel, while Brent crude reached $72.87 on Friday, even before the weekend escalation amplified geopolitical risks.
Barclays flags $100 oil risk
Barclays on Saturday raised its forecast for Brent crude to $100 per barrel, warning markets could face severe disruption risks.
“Oil markets might have to face their worst fears on Monday. As things stand right now, we think Brent could hit $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 outlook followed initial US-Israel strikes on Iran and Tehran’s retaliation, with tensions intensifying further after the reported death of Iran’s Supreme Leader Ayatollah Ali Khamenei.
Ali Vaez, who heads the Iran Project at the International Crisis Group, said Iran’s geographic position makes the situation particularly sensitive. “Even limited disruption could spike energy prices, fuel inflation, and rattle global markets,” he said in a post on X.
Oil’s familiar crisis pattern
Equirus Securities said oil markets historically react sharply during geopolitical crises before stabilising.
“Pattern is consistent: Oil overreacts first, embeds a geopolitical risk premium, and then gradually adjusts as trade flows reroute & fundamentals reassert themselves. Real forecasting challenge is not predicting the initial spike but estimating how long disruption and embedded premium will persist,” the brokerage noted, ET quoted.
It cited the Russia–Ukraine war as an example, where crude briefly surged above $120 per barrel before retreating as supply routes adjusted.
However, the brokerage warned that risks could turn structural if shipping through the Strait of Hormuz is threatened.
“Even partial disruption risk could embed a $20–$40/bbl geopolitical premium, reopening a pathway toward $95–$110+, well beyond mechanical impact of Iran’s barrels alone,” it added.
India faces inflation risks
Higher oil prices pose immediate macroeconomic challenges for India, a major crude importer.
Manoranjan Sharma, Chief Economist at Infomerics Ratings, said elevated energy costs could widen external imbalances. “Elevated import costs are likely to widen the current account deficit and further strain the fiscal deficit through increased subsidy obligations,” he said.
Madhavi Arora, Chief Economist at Emkay Global Institutional Equities, added that tensions could also disrupt shipping and increase freight and insurance costs even without a full blockade.
“As per 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 stocks, helping absorb short-term shocks,” she said.
She added that if tensions ease and OPEC+ output rises, macroeconomic damage could remain contained. “If however the situation normalizes with OPEC+ also indicating a sharp output increase (0.4mb/d), and oil doesn't spike and fall below $70/bbl, the macro impact could be contained,” Arora said.
Market impact on Dalal Street
On Dalal Street, oil marketing companies are expected to remain in focus as crude prices climb. Refinery stocks could benefit from rising oil prices, while tyre and paint companies may face pressure because petroleum derivatives form a key part of their input costs.
With geopolitical risks now driving sentiment, analysts say the trajectory of crude prices will depend largely on whether disruptions around the Strait of Hormuz intensify or 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 opinions do not represent the views of The Times of India)
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