Key Highlights
- Crude oil eases to mid-$60s as ceasefire calms Strait‑of‑Hormuz supply worries.
- SBI report forecasts oil stabilizing near $65, shifting from peak‑fear levels above $79.
Crude oil prices are expected to remain around USD65 per barrel after US President Donald Trump declared a cease-fire between Iran and Israel, providing relief to global markets.
According to a recent SBI report, the oil price is heavily influenced by Iran's response to recent Middle East tensions. The report presented three possible scenarios, each with a different price impact.
With the ceasefire announced, the third scenario of a 'ceasefire with Israel' has taken effect, and crude oil prices are expected to stabilize at USD65.
According to the report, "different scenarios being developed along the Iran-Israel conflict appear a little far-fetched, particularly a worst-case scenario for oil's trajectory, given that any sharp increase in prices may not be a long-term phenomenon."
If Iran had chosen a path of significant retaliation against the US and the conflict had spread regionally, oil prices could have risen dramatically, reaching as high as USD 130 to 140 per barrel. This would have caused a major shock to oil-importing countries.
The second scenario considered Iran's symbolic retaliation and continued conflict with Israel, which would have kept crude oil prices steady at USD 80 to 90 per barrel.
Now that President Trump has officially declared a ceasefire, the report predicts that the market will take the third and most optimistic path, with oil prices falling to around USD 65 per barrel in the coming weeks.
During the recent Israel-Iran-US conflict, crude oil prices rose as high as USD 79 per barrel on Monday, reflecting market concerns about further escalation.
However, the SBI report noted that some of the extreme projections for oil prices, particularly in the worst-case scenario, appear unrealistic.
Also Read: Trump's Airstrikes on Iran Could Risk India's $40 Billion Trade
The report went on to say that the only event that could have resulted in sustained prices above the crude price of USD 130 would have been the use of weapons of mass destruction by either side, a situation so severe that the cost cannot be calculated using standard economic modeling.
On Monday (local time), US President Donald Trump announced what he called a "complete and total" ceasefire between Israel and Iran, stating that it would take effect in about six hours.
In a post on Truth Social, Trump stated that the ceasefire was mutually agreed upon by both countries and would result in a significant de-escalation of hostilities in the region.
With tensions easing, global oil markets may return to stability, which is a significant benefit for oil-importing countries such as India. Lower oil prices will help to reduce the current account deficit and boost economic growth.
