Oil prices remained highly volatile as geopolitical tensions around the Strait of Hormuz continued to dominate market sentiment. After briefly retreating when reports suggested exports through the strait were higher than expected, prices rebounded sharply following attacks on vessels linked to the UAE and concerns that restrictions on Iranian ports could persist indefinitely. Traffic through the strait fell to exceptionally low levels, reinforcing fears of a prolonged supply disruption. Negotiations involving Iran and Oman over reopening shipping routes appeared to stall, while increasingly aggressive rhetoric from both Iran and the United States further undermined confidence in a near-term resolution. These developments pushed crude prices to their highest levels in weeks and strengthened expectations that elevated prices may persist.
On the supply side, developments were broadly positive for India. A U.S. license allowing India’s Oil and Natural Gas Corporation to resume activity in Venezuela could improve access to crude supplies and strengthen India’s position in the global oil market. At the same time, Russia has begun importing gasoline from India as Ukrainian drone attacks continue to damage Russian refining infrastructure. Repeated strikes have disrupted refinery operations and reduced domestic processing capacity, creating opportunities for Indian fuel exporters.
Demand expectations have weakened further. The International Energy Agency lowered its outlook and now expects global oil demand to contract more sharply in 2026 than previously forecast. The agency attributes the downgrade largely to the ongoing disruption in the Strait of Hormuz and higher fuel costs. Although demand is expected to recover in 2027, uncertainty remains high because the factors depressing consumption show little sign of easing.
Downstream markets remain exceptionally tight. Refinery outages, attacks on energy infrastructure, and shipping disruptions have reduced global throughput, while demand for refined products has stayed strong. U.S. diesel margins reached record levels, inventories fell to unusually low seasonal levels, and analysts increasingly view the market as constrained by limited refining capacity rather than insufficient incentives to produce fuel.