Iran has stepped up attacks on tankers around the Strait of Hormuz, with US Central Command confirming on Thursday that a container ship sank following Iranian bombardment, according to latest reports from Reuters. Oil flows through Hormuz recovered to an average of 16 million barrels per day in September, the highest since the conflict began, with around 10 million barrels passing through the strait and another 6 million moving through Red Sea and Gulf of Oman bypass routes. However, Kpler's crossing data shows crude through the strait down 27% from a wartime high to at least 10.1 mb/d, with laden exits falling from about 11.0 mb/d (1-7 October) to 6.2 mb/d (8-12 October). Cargo volumes traversing the key waterway are nearing pre-war levels, topping 100 million barrels of crude last week, according to The Hindu BusinessLine. Gulf crude exports recovered to 14.1 mb/d in September from 9.8 mb/d in August, representing 78% of February's 18.2 mb/d levels, though this includes bypass loadings at Yanbu and Fujairah. Washington appears willing to sustain economic pressure while facilitating shipping, as noted by Kpler, with the US military providing air protection and Saudi Arabia and UAE increasing payments to tanker operators.
Brent crude hit $110 a barrel for the first time since May, representing a 3.7% surge and marking the second straight weekly gain as traders ramp up bets on higher prices ahead of the weekend, according to The Hindu BusinessLine. The global benchmark rose 3.7%, notching a second straight weekly gain, as bullish sentiment crystallized amid ongoing conflict in major export centers. The last time prices reached these levels was almost five months ago, when paralyzed global crude and fuel flows spurred a fragile, short-lived agreement that briefly reopened the Strait of Hormuz. Crude is up more than 75% this year as the wars in the Middle East and Russia disrupt supplies, with physical markets continuing to signal tightness as refined products such as diesel have rallied even harder, with European futures for the commodity up more than twofold this year. The price of sending a typical cargo from the Gulf Coast to Rotterdam has fallen about 12% over the past week, according to Baltic Exchange data, contributing to the relative strength of Brent over US benchmarks.
Seth R. Freeman, Senior Managing Director at GlassRatner Advisory & Capital Group, told NDTV Profit that Brent crude could climb to $115 per barrel, while a move to $120-$125 would represent a significant jump from current levels. This aligns with Goldman Sachs' recent forecast revision, which has raised its December 2026 crude oil price forecast by $5 to $90 per barrel from the previous $85 a barrel. The forecast represents a 6% increase from the previous forecast and remains nearly 13% lower than the current price of around $110/bbl. For 2027, Goldman maintains its base case average Brent forecast of $80/bbl, while Freeman's projections suggest potential for higher levels if geopolitical tensions continue to escalate. UBS economist Alessandro Bee said last month that prices could reach $150-$200 if the Hormuz crisis prolongs, noting that if the Strait of Hormuz were to remain closed for several quarters, oil reserves would eventually run out and the market could panic.
US crude stocks fell by 8 million barrels during the week ending October 9, according to data released by the Energy Information Administration, supporting prices amid the supply disruption concerns. This significant drawdown comes as about 14 million barrels per day (12 million of crude, 2 million of products) left the Middle East over a recent 7-10 day stretch, compared to around 20 million bpd before the war. The workaround is squeezing the global tanker fleet, with average crude tanker earnings topping $500,000 a day in early October, 10 times the 2025 average, according to ING's Rico Luman. Vitol Group CEO Russell Hardy warns that without the current ship-to-ship transfer arrangements, there would be a $200-per-barrel scenario. Saudi's Red Sea inventories including Yanbu are close to operational minimums, with exports from there dropping significantly in recent days. The US has also sought to tame prices by drawing from emergency stockpiles and lobbying other nations to do the same, offering up to 17 million barrels from the Strategic Petroleum Reserve on Friday.
India imports 85% of its oil, making it highly vulnerable to crude price volatility. A move towards $120 crude could pressure the rupee, inflation, and equities simultaneously. The rupee has fallen more than 7% this year, testing record low figures in May and early October when it neared the 97-mark against the US dollar. The RBI's weekend measures have helped, with the central bank now supplying the full dollar needs of IOC, HPCL and BPCL, which analysts estimate at $10-12 billion a month. The rupee recovered to 95.28 on Tuesday and strengthened to about 94.92 on Wednesday morning, a gain of nearly 2% from Friday's close. However, HDFC Bank economist Sakshi Gupta warned that rate hikes are a weak short-term defence, and that the rupee's weakness comes from oil, equity valuations, foreign outflows, the AI trade and dollar strength. Mecklai Financial Services warned that a break above 97 could take the rupee towards 98.50.
Retail inflation climbed to 5.54% in September from 4.82% in August, a jump of 72 basis points, and above the 5.40% forecast in a Reuters poll, according to data released on October 12. Food inflation rose to 7.74% from 5.97%. The RBI raised its repo rate by 25 basis points on October 7, its first hike in almost four years, and projects 5.2% inflation and 7.1% growth for the year to March 2027. Goldman Sachs Chief India Economist Santanu SenGupta told NDTV Profit on Oct. 9 that the RBI is anticipated to raise interest rates another three times by June, bringing the total increase to 75 basis points. A 10% rise in crude adds about 20 basis points to inflation, meaning a move to $120 would add roughly 25 basis points if sustained, which would take the inflation reading even close to the RBI's 6% upper tolerance limit. Finance Minister Nirmala Sitharaman said on Tuesday at the Bloomberg New Economy Forum that the RBI will keep working to prevent excessive volatility rather than fix the rupee at a set level.
