Crude Prices Dip Below $75, but Pre-War Stability Remains Elusive

Global oil markets are witnessing a significant cooling period as Brent crude prices slip below the $75-per-barrel mark following the reopening of the Strait of Hormuz. However, despite this immediate relief, analysts warn that returning to the pre-conflict stability of $65–$70 per barrel may take considerable time.

The Shift in the Indian Oil Basket Dynamics

The Indian oil basket, a critical metric for India's economy, was recently priced at $74.34 per barrel. While this is significantly lower than the peak levels seen during the US-Iran conflict that began on February 28, it remains above the pre-war average of $65–$70.

A major factor in this pricing discrepancy is the strategic shift in sourcing by Indian refiners. To mitigate risks during the supply disruptions in West Asia, refiners aggressively diversified their procurement. Through February, the Indian basket was composed of 78.71% sour crude (Oman and Dubai average) and 21.21% Brent dated. However, by March, this composition shifted dramatically to 61.02% Brent dated and 38.98% sour crude. This shift towards Brent helped manage supply continuity but influenced the overall price profile of the national basket.

Lessons from the Conflict Peak

The volatility experienced during the height of the conflict serves as a stark reminder of how quickly energy costs can escalate. At the peak of the unrest, Brent crude surged to nearly $114 per barrel. For India, the impact was even more pronounced; the Indian oil basket touched a staggering $150 per barrel.

This extreme spike was driven by a combination of soaring West Asian crude prices, Indian refiners being forced to make spot purchases at high premiums, and a massive increase in freight and insurance costs. While the current prices represent less than half of those peak levels, the market has yet to find its "new normal."

Future Outlook: Volatility and Inventory Risks

Industry experts suggest that while the reopening of the Strait of Hormuz provides breathing room, the recovery of production and trade flows is not instantaneous. S&P Global Energy notes that global oil inventories are projected to decline through June and July, a factor that could trigger renewed upward pressure on prices.

Market analysts are divided on the exact trajectory of Brent crude. Jim Burkhard of S&P Global Energy anticipates significant volatility, suggesting Brent could move toward the $80–$90 range, with a wider potential swing between $65 and $100. Meanwhile, JP Morgan has adopted a slightly more conservative stance, lowering its outlook to an average of $86 per barrel for Q3 2026 and $80 per barrel for Q4 2026.

Key Takeaways

  • Strategic Sourcing: Indian refiners have significantly increased their reliance on Brent crude (from 21.21% to 61.02%) to bypass West Asian supply disruptions.
  • Price Volatility: While current prices are below $75, analysts expect Brent to fluctuate between $65 and $100 depending on geopolitical developments and inventory levels.
  • Supply Chain Recovery: The reopening of the Strait of Hormuz is a positive sign, but full recovery in global production and trade flows is expected to be a slow process.