Oil prices experienced a meaningful shift as Israel and Lebanon agreed to a ceasefire conditional on Hezbollah standing down, a development that could directly unlock stalled US-Iran negotiations by removing Tehran's central precondition for resuming talks. According to Business Standard, Brent crude closed at $98.80 against futures at $97.80 on June 3rd, restoring a physical premium of around $1, signaling that physical buyers are once again paying above paper market levels for actual barrels. The August Brent crude contract on the Intercontinental Exchange was trading at $96.99 a barrel, up 1.03% from its previous close, while the July contract of West Texas Intermediate (WTI) on the Nymex was trading at $94.85 per barrel, higher by 1.15%. The physical market reversal matters as it indicates that geopolitical risk is being treated as a more permanent component of pricing, with oil prices likely to remain more volatile and news-driven moves persisting longer rather than reversing quickly.
Probal Sen, Oil and Gas Analyst at ICICI Securities, believes global energy supply chains have structurally changed after the Middle East conflict, with oil prices potentially remaining elevated even if geopolitical tensions ease. According to CNBC TV18, Sen believes crude oil prices could stay in the $85–90 per barrel range for the next six to 12 months, keeping pressure on India's fuel import bill and oil marketing companies (OMCs). "This is not a binary situation, where if the ceasefire is announced, the strait starts flowing normally from the next day," Sen said. "There's a structural change in the way that the energy dynamics and energy supply chains will work." He added that India's crude basket is currently being purchased at a premium to Brent crude prices, with earlier premiums having surged to as high as $15–20 per barrel during peak supply shortages, though they have now eased somewhat.
India has been increasing crude imports from alternative regions to manage supply disruptions, with Venezuela now contributing close to 10% of India's crude imports, while supplies from the US, Brazil and Africa have also increased. However, Sen said India is still running below pre-conflict import levels. Despite sourcing crude from countries like Russia and Venezuela, Sen said buyers are no longer getting meaningful discounts, with these imports mainly helping India secure supply rather than reducing costs. "I don't think there is any cheap crude available in the market right now," he said. The ongoing war and blockade of the Strait of Hormuz have shaved 20% off global LNG supplies, with the conflict removing more than 80 million tonnes per annum (mtpa) of LNG from world markets, equivalent to 20% of global supply.
The impact is being felt most sharply by oil marketing companies, with Sen saying liquefied petroleum gas (LPG) losses have risen significantly, reaching nearly ₹600 per cylinder compared to less than ₹100 earlier. Even after recent fuel price hikes, petrol and diesel retail margins remain in the negative. As a result, Sen expects OMC earnings to remain under pressure over the next two quarters. In contrast, upstream companies that produce crude oil could benefit from elevated prices, with Sen recommending ONGC in the current environment, citing attractive valuations, expected production growth and a stronger earnings outlook. Refining companies are benefiting from tighter global refining capacity, with product spreads for petrol, diesel and aviation turbine fuel remaining strong because refining capacity in several regions continues to be constrained.
Despite recent diplomatic developments, oil prices are expected to remain elevated in the $80–95 range well beyond any headline agreement due to the scale of wartime disruption and time required for market rebalancing. According to Business Standard, Kuwait Petroleum Company has warned that restoring output would take considerably longer than markets assume, even if Hormuz reopens imminently. MCX Crude Oil has rebounded sharply from the ₹8,270 support zone and remains above its key medium-term trend support, indicating that the broader recovery structure is intact. As long as MCX Crude Oil sustains above the crucial ₹8,900–8,850 support band, the bullish bias is likely to remain valid, with a move above ₹9,180 potentially triggering fresh buying interest toward ₹9,600–9,850 in coming weeks.
