Brent crude prices have risen by over 60% since the onset of conflicts in the Middle East, reaching around $112 per barrel on Monday from about $70 per barrel. In contrast, crude oil prices for May futures on the Multi Commodity Exchange (MCX) have surged by 0.65% to Rs 9,318 per barrel. Over the past 30 days, crude prices have escalated by approximately 56%, with US West Texas Intermediate (WTI) trading near $98.75 per barrel on Monday following a more than 2% increase in the previous session.
Escalating tensions in West Asia are posing threats to crucial shipping lanes, particularly the Strait of Hormuz, leading to production cuts and force majeure declarations in oil production facilities across the Middle East. US President Donald Trump has issued a 48-hour ultimatum to Iran to fully open the Strait of Hormuz, with the deadline set to expire on Monday, causing concerns among commodities traders. Trump had cautioned that Iran’s power plants would face severe consequences if the shipping lanes remain closed.
In response, Iran’s administration has retaliated by threatening to target energy infrastructure in Gulf countries, asserting that the Strait of Hormuz remains open for navigation despite wartime conditions, with necessary precautions being implemented. Goldman Sachs has revised its 2026 Brent average estimate to $85 per barrel from $77/bbl and anticipates a short-term average of $110/bbl for the March-April period. The financial institution predicts that traffic through the Strait of Hormuz will remain at only 5% of normal levels for an extended six-week period before a gradual one-month recovery.
Despite tightening supply conditions in Asia, crude inventories in OECD economies in the US and Europe are increasing, indicating that global supply had been surpassing demand before the conflict erupted. Goldman Sachs also projects that crude output losses in the Middle East could surge from the current 11 million barrels per day to a peak of 17 million barrels per day.
