Brent crude futures rose $1.65, or 1.57%, to $107 a barrel while US West Texas Intermediate crude climbed $1.29, or 1.40%, to $94 a barrel on Tuesday, marking the second consecutive session of gains as oil prices continue their upward trajectory. According to The Economic Times, the latest surge comes amid concerns over potential supply disruptions from the Middle East due to the US-Iran conflict, with these fears outweighing signs of recovery in crude exports from the region. The price movements reflect growing market uncertainty as US and Iranian officials separately held talks with mediators in a renewed attempt to end the seven-month war, with further discussions expected to centre on an amended version of a seven-day proposal Iran presented last week.
Brent crude prices are expected to remain elevated through the second half of FY27 and could rise to $120 per barrel as geopolitical tensions in West Asia continue to pose significant upside risks to global energy markets. According to a comprehensive report by Brickwork Ratings, in the base-case scenario to which it assigns a 55% probability, Brent crude is expected to average between $95 and $110 a barrel in the second half of FY27. As reported by Brickwork Ratings, Brent futures rose about 20% in a month to around $109 on September 15, while physical Brent reached $130.80, indicating tight supply conditions. The report further assumes that disruptions in the region persist while pipeline and shipping operations recover only partially. According to Rajeev Sharan, Head of Research at Brickwork Ratings, Brent is expected to trade in a broad $100-110 per barrel range over the next one to two months, although risks remain skewed to the upside. Prices could climb towards $120 a barrel if supply disruptions intensify, while a reopening of the Strait of Hormuz could ease prices towards $90 a barrel.
Crude exports from major Middle Eastern producers rose to 12.8 million barrels a day in September, their highest level since February, according to preliminary data from data provider Kpler reported by The Economic Times. The increase was driven by higher shipments from Saudi Arabia and the United Arab Emirates, providing some relief to global supply concerns. However, the latest escalation came after the Houthis said they had attacked Saudi military positions in Jazan, while Saudi authorities reported intercepting six ballistic missiles launched towards Taif and Yanbu on Thursday. The Saudi-led coalition confirmed the interception of these missiles, thwarting attacks on the southern province of Taif and Yanbu area on the Red Sea. The Houthi announcement also claimed attacks on what they described as a 'sensitive target' in the capital Riyadh and Saudi Aramco petroleum facilities in the Red Sea port city of Yanbu, though Saudi authorities have not immediately confirmed these specific claims.
The renewed violence is particularly significant for oil markets because Saudi Arabia has been relying more heavily on routes outside Hormuz amid the wider US-Iran conflict. As reported by Reuters, Saudi crude shipments had recovered to more than 4 million barrels per day in September, while vessel traffic through Hormuz remained sharply below pre-war levels. The Houthis have expanded their activity along the Red Sea, threatening another important route for oil and shipping, with earlier attacks already affecting Saudi energy infrastructure including the East-West pipeline that provides a key route to the Red Sea. Yanbu is an important Red Sea port and an outlet for Saudi crude transported through the kingdom's East-West pipeline, which provides an alternative route to the Strait of Hormuz. Oil prices had been under pressure earlier in the week on hopes that diplomacy could ease the conflict and improve energy flows, but the latest attacks have pushed that optimism aside, increasing the premium investors are assigning to potential supply disruptions.
Saudi Arabia has taken proactive measures to address regional supply concerns, selling almost 100 million barrels of oil to Asian buyers since the middle of last week, according to traders familiar with the matter. As reported by Business Standard, the crude for delivery in October and November will be sent via the Strait of Hormuz, with Chinese state-run and independent refiners, as well as processors in India, Japan and South Korea among the buyers. The US is also considering regulatory relief that would allow wider sales of red-dyed diesel in an effort to lower prices, people familiar with the discussions told Reuters. The move could allow some buyers to avoid federal fuel tax and has emerged as a leading alternative to a diesel export ban. Greek-operated air defense systems in Saudi Arabia intercepted a drone and a ballistic missile on Thursday near Yanbu's major oil refining facilities, occurring alongside the attacks.
According to Brickwork Ratings, a sustained $10 rise in crude oil prices could widen India's current account deficit by 0.3-0.4% of GDP and add 20-30 basis points to inflation over a year. The report has estimated that a prolonged disruption in the Strait of Hormuz and attacks on Gulf energy infrastructure could push Brent crude to $120 or higher, while such a scenario would worsen inflationary pressures and weaken the rupee. Conversely, the report's upside scenario which carries a 15% probability assumes a durable ceasefire in West Asia and restoration of Saudi export routes, under which Brent crude could decline to $80-90 a barrel, easing cost pressures for oil marketing companies, airlines and chemical producers while creating room for monetary easing in FY28. Apart from oil commodities, in the base-case scenario, the report estimated the Indian rupee at ₹94-98 against the US dollar, CPI inflation at 5 to 5.5% and FY27 real GDP growth at 6.6 to 7%.
