Oil prices experienced a 1.2% decline to $88 per barrel on Friday, with Brent crude falling $1.03 to $88 and US West Texas Intermediate (WTI) crude slipping $1.50 to $82.09 by 0215 GMT, according to The Hindu BusinessLine. However, both benchmarks remained on track for a monthly rise of about 20%, demonstrating the resilience of oil markets despite ongoing geopolitical tensions. As per ING analyst Daniel Hynes, crude oil is edging lower as rising Middle East tension is being offset by signs of increased flows in the Strait of Hormuz. The monthly recovery comes despite crude oil prices plunging more than 9% to $88 per barrel amid easing tensions in West Asia, with the latest developments showing Brent crude dropped 6.71% to USD 90.29 per barrel following the easing of West Asia tensions over the weekend. The conflict, now in its sixth month, halted most shipping through the Strait of Hormuz, a narrow waterway that previously served as a delivery route for a fifth of the world's oil and natural gas. With global supplies constrained, prices for Brent crude soared from about $70 to above $100 a barrel for much of March, April and May, and at one point reached $126.
Among oil marketing companies, HPCL was the top gainer as its shares traded 3.4% higher at ₹394 on the National Stock Exchange (NSE), while Indian Oil shares advanced 2.17% intraday at ₹141 and BPCL shares gained 2.5% to finish at ₹318. As reported by Moneycontrol, downstream oil marketing companies, which refine crude oil and sell petroleum products, are seen benefiting from lower crude prices as they reduce input costs and support margins. However, BPCL and HPCL reported Q1 FY27 losses of roughly ₹1,872 crore and ₹12,264 crore respectively, as surging crude costs collided with weak fuel marketing margins that these companies weren't able to pass fully onto consumers. This demonstrates the real-world impact of oil price volatility on company balance sheets, with higher oil costs squeezing fuel-intensive businesses. According to The Hindu BusinessLine, higher security risks have boosted freight costs and insurance premiums to embed a significant geopolitical risk premium in oil prices, though the broader trend remains constructive for downstream companies. The average price for a gallon of regular gasoline, which was below $3 before the US and Israel launched attacks on Iran, reached $4.10 this week - about $1 more than the cost of a gallon at this point last year.
The Strait of Hormuz, which usually carries about a fifth of global shipments of crude oil and liquefied natural gas, has seen significant improvement in flows despite the ongoing US-Iran conflict. As per The Hindu BusinessLine, tanker traffic has continued through the Strait of Hormuz and the Red Sea, with Saudi Arabia seeking to lead a coalition to boost defence cooperation in the Bab El-Mendeb Strait, the Red Sea and the Gulf of Aden. The Saudi defence ministry said 14 nations, including Djibouti, Egypt, Pakistan, Sudan and Turkey, were in support of the multinational maritime defence coalition. However, Iran-aligned Houthi militants in Yemen declared a naval blockade last week on Saudi Arabia, threatening the Red Sea route for its oil exports, an alternative to the Strait of Hormuz. Despite these challenges, the strait has been largely blockaded since the February 28 launch of the U.S.-Israel war on Iran, making the current flow improvements particularly significant for global oil markets.
The sharp fall in oil prices appears to be driven by President Donald Trump's announcement that the United States and Iran are holding talks aimed at ending the conflict in the Middle East. According to Axios, Trump decided to pause further strikes on Iran to give negotiations another opportunity, though it remains uncertain whether substantive discussions are underway. Iran's military said it had suspended retaliatory attacks on US military bases and personnel in the region following Trump's decision to delay further strikes. Before the pause announced on Friday, Iran had been launching near-daily attacks targeting locations in countries such as Kuwait, Bahrain, and Jordan over the previous two weeks. As per The Economic Times, President Trump said on Monday the United States was having "good talks" with Iran and that there was a chance of a resolution, though he warned that US strikes would resume if negotiations failed while Iran issued similar comments about retaliation. In an interview with Axios, Trump said diplomacy remained the preferred option but cautioned that the window for negotiations was limited, stating "We are in very deep talks with Iran. If they don't work out, we will go back to very strong military action." In Washington, President Trump met with Israeli Prime Minister Benjamin Netanyahu, as the US leader sought to avoid renewed bombing in Iran. After the meeting, an Israeli spokesman said all parties preferred the "easy way," a negotiated settlement, over the "hard way," military action, to stop Tehran developing a nuclear weapon, as reported by Bloomberg.
Refineries are experiencing historically high "crack spreads," which describe the profits refineries expect to make based on oil and product prices, according to Tom Seng, assistant professor of energy finance at Texas Christian University. In late July, refineries planning to buy a barrel of oil for about $80 were looking at potential profits of $50-$60, which is huge compared to the average range of $20-$25. "The return on refining, on a percentage basis, has skyrocketed," Seng said. American refineries are running at near-full capacity and are particularly well-positioned to benefit as some refineries in the Middle East and Russia were damaged, while others in Asia can't get the amount of oil they used to from the Middle East. Jet fuel and diesel, which is priced about 41% higher in the US than before the Strait of Hormuz was blocked, are driving much of the profitability. "If you're a company that owns a bunch of refinery capacity, things look pretty good," Fitzgerald said. However, not all refineries have been able to get the supply of crude oil they need to meet demand since the conflict began, with some companies struggling with higher transportation and security costs.
Democrats in Congress introduced bills in March to tax major oil producers for profits they show from 2026 onward and have the tax proceeds redistributed to consumers. The legislation, introduced by Sen. Sheldon Whitehouse of Rhode Island and Rep. Ro Khanna of California, would amend the US tax code to impose a per-barrel excise tax on companies that produced or imported at least 300,000 barrels of oil per day in 2025. The tax would be 50% of the difference between the oil price at the time of the levy and the average price per barrel last year. "It's fair to put a windfall profits tax on inordinate windfall profits rather than cut off children's food programmes," Whitehouse said. "We cracked $4 again per gallon last weekend in gas stations that I drove by, and that's a big expense, particularly for families that get their income from driving around from job to job in the work van or the work truck," Whitehouse added. The money oil companies accrued between the beginning of April and the end of June could receive extra scrutiny this year, as gasoline, diesel and jet fuel prices climbed during that period, increasing costs for drivers and airline passengers. Six of Europe's largest oil companies posted first-quarter profits of $22 billion altogether, a total which was 43% higher than the same time last year, according to Global Witness.
