The fragile calm in West Asia has been shattered by fresh US-Iran strikes, clouding the outlook for global oil markets and Indian refiners after last week’s easing in crude prices.
The latest exchange began after Washington alleged that Iran had targeted another commercial vessel in the Strait of Hormuz. US Central Command responded with fresh strikes on Iranian military targets on Saturday, following which Iran's Islamic Revolutionary Guard Corps (IRGC) attacked US military installations in Kuwait and Bahrain.
Indian refiners, meanwhile, are taking a cautious wait-and-watch approach despite tanker traffic through the Strait of Hormuz beginning to recover and the US temporarily waiving sanctions on Iran until 21 August, according to a refinery executive who declined to be identified.
“Ships have just started to transit the Strait of Hormuz,” the executive said. “Another flare-up in the region would be concerning.”
Analysts expect the renewed hostilities to inject fresh volatility into oil markets when trading resumes on Monday, amid concerns over the longevity of the memorandum of understanding (MoU) signed between the two countries on 17 June, as investors reassess the risk of supply disruptions through the Strait of Hormuz, the world’s most critical oil shipping chokepoint.
On Friday, Brent and West Texas Intermediate (WTI) crude prices retreated to pre-conflict levels, with the August contracts falling 4.34% and 3.74%, respectively, to settle at $71.99 and $69.23 a barrel.
According to Jim Burkhand, vice president and head of research for oil markets, energy and mobility at S&P Global Energy, Brent crude could remain around $70-75 per barrel in the near term before rising to $80-90 per barrel in the second half of 2026 as inventories tighten.
Burkhard said that even if flows through the Strait of Hormuz and Gulf production recover, global oil inventories would continue to tighten through June and July.
“This means, despite the fall in prices so far in June, upward price pressure could return as inventories fall to even lower levels. Also, demand for crude oil and products to replenish inventories will be a factor later this year and in 2027,” he added.
Data from S&P Global showed that 78 vessels transited the Strait of Hormuz on 24 June—the highest daily count since the conflict began and equivalent to 57% of pre-conflict volumes. Thirty-three of these vessels, mostly outbound, used the new Omani safe corridor. However, eight vessels went “dark” during transit, as interference with ship-tracking signals created anomalies in vessel-position data.
Meanwhile, India’s ministry of external affairs said on 23 June that 11 India-bound vessels crossed the Strait of Hormuz since the MoU was signed.
These included three Indian-flagged crude oil tankers, each carrying more than 285,000 metric tonnes of crude oil. The list also includes one foreign-flagged LPG carrier, one foreign-flagged crude oil tanker, and six foreign-flagged bulk carriers transporting fertiliser cargo.
West Asia, which supplied 60-70% of India's crude imports before the conflict, now accounts for about 30%, with Russia supplying more than half of India's oil needs. Analysts expect Russia, which continues to offer crude at discounts of $4-5 per barrel to Brent, to remain India's largest supplier in the near term.
The latest flare-up underscores the fragility of the ceasefire despite last week’s easing in tensions.
Speaking at the ICIS Asian Base Oils & Lubricants Conference in Singapore on 25 June, Vandana Hari, founder and chief executive of energy market analysis firm Vanda Insights said that while the recent easing in tensions between the US and Iran may provide short-term relief, the underlying fault lines in West Asia remain unresolved, leaving the region highly vulnerable to renewed flare-ups.