Crude oil prices have surged above $104 after US President Donald Trump rejected Iran's latest peace proposal, calling it "totally unacceptable." The development has revived fears of a prolonged geopolitical conflict in the Middle East, especially around the strategically important Strait of Hormuz, which handles nearly 20% of global oil trade. Market sentiment turned bullish as Trump's rejection of Iran's proposal, which included separation of nuclear negotiations from broader geopolitical issues, reduced hopes for an immediate resolution to the ongoing conflict. Supply concerns intensified as the Strait of Hormuz remained largely closed, keeping global crude markets tight and raising fears over disruptions to one of the world's most critical energy shipping routes. According to Kedia Advisory, shipping risks remained elevated with Kpler data showing that several crude tankers exiting the Strait of Hormuz had switched off tracking systems to avoid potential Iranian attacks. The latest developments include Israeli government claims of killing Hezbollah's most senior commander in an airstrike on Beirut on Tuesday, in retaliation for Saturday's cross-border rocket attack on Israel, as reported by Reuters.
Indian markets opened lower on Tuesday, extending a three-session losing streak as geopolitical tensions and rising crude oil prices continued to weigh on investor sentiment. According to reports from The Hindu BusinessLine, the Sensex opened at 75,688.39, down from its previous close of 76,015.28, and was trading at 75,596.46, declining 418.82 points or 0.55 per cent as of 9.17 am. The Nifty 50, which closed at 23,815.85 on Monday, opened at 23,722.60 and was trading at 23,725.85, lower by 90 points or 0.38 per cent. In the previous session, the Sensex had shed 1,313 points and the Nifty 50 had fallen 360 points — a drop of nearly 1.5 per cent. The immediate trigger for the slide remains the collapse of US–Iran ceasefire talks, with former US President Donald Trump describing the truce as being on "massive life support."
For India, which imports nearly 85% of its crude oil needs, rising oil prices are more than just a global headline. They directly affect inflation, fiscal stability, corporate earnings, and stock market sentiment. Higher oil imports increase India's dollar outflow, which can weaken the Indian rupee. A weaker rupee further raises import costs and creates additional inflationary pressure. India's current account deficit (CAD) tends to widen when oil prices rise sharply, with many economists estimating that if crude sustains above $100 per barrel for a prolonged period, India's CAD could move closer to 2% of GDP. This may increase pressure on government finances and foreign exchange reserves. Global uncertainty often leads to foreign investor outflows from emerging markets, including India, which can increase volatility in equities, especially in sectors heavily dependent on fuel or imported raw materials. Not every sector reacts the same way to rising crude oil prices - airline companies are among the biggest fuel consumers, with higher aviation turbine fuel costs hurting profitability. Paint manufacturers use crude-linked derivatives as raw materials, while several chemical companies depend on petroleum-based feedstock, making them vulnerable to crude price spikes.
Technical analysis reveals fresh buying momentum in crude oil markets, with open interest increasing by 3.67% to settle at 10,829 while prices gained ₹352. According to Kedia Advisory, crude oil is getting support at ₹9,168, below which prices may test ₹8,961 levels, while resistance is seen at ₹9,572, with a move above likely to test ₹9,769. For India, a major oil importer, persistently high energy prices heighten the risk of imported inflation and put pressure on the current account. The US dollar has strengthened on safe-haven demand, pushing the USD/INR pair to approximately 95.3 — near a record high — after the rupee depreciated 83 paise in the previous session. Additionally, WTI crude oil prices may receive support from increasing odds of a Fed rate cut in September, as the Federal Reserve is anticipated to maintain current interest rates on Wednesday but there is growing speculation about potential rate cuts that could bolster economic activity in the United States, the world's largest consumer of crude oil.
Additional support came from tightening US inventory data, with US crude oil inventories declining by 2.314 million barrels to 457.2 million barrels during the week ended May 1, while gasoline inventories fell by 2.504 million barrels and distillate stocks dropped by 1.294 million barrels. Crude stocks at the Cushing, Oklahoma hub also declined by 648,000 barrels, though refinery activity slowed slightly. Despite the inventory drawdowns, lower fuel inventories continued to support overall market sentiment. The US Energy Information Administration (EIA) will report Crude Oil Stocks Change later in the North American session, with the market anticipating a decline of 1.60 million barrels for the week ending July 26, following the previous week's decline of 3.741 million barrels. ANZ analysts expect Brent crude prices to remain above $90 per barrel through 2026 amid persistent supply concerns and gradual inventory rebuilding.
