Oil falls to pre-war levels as Hormuz traffic rebounds — where do petrol, diesel prices stand?

Oil prices fell to pre-war levels on Thursday as the United States said flows through the Strait of Hormuz were nearing normal and its top diplomat wrapped up a Gulf tour aimed at winning support for a preliminary Iran deal.

Brent crude, the international benchmark, dropped to about $72-73 a barrel, while US crude fell below $70 a barrel, erasing the geopolitical risk premium that had driven prices as much as $120 a barrel during the height of the conflict earlier this year, news agency PTI reported.

Both benchmarks are now back near levels last seen in late February, before hostilities disrupted Middle East energy markets.

Petrol and diesel prices

Despite the sharp fall in crude oil prices, retail fuel rates remained unchanged on Thursday.

Petrol and diesel prices had been raised by about ₹7.50 per litre each during the recent spike in international oil prices, but state-owned fuel retailers have so far refrained from cutting pump prices, according to industry data.

Officials said the three state-run fuel retailers are currently earning healthy marketing margins on petrol, although diesel sales continue to generate a modest loss. The companies had held retail prices steady for nearly two-and-a-half months despite rising global crude prices before implementing only a partial increase.

Industry officials noted that fuel prices are not adjusted based on daily movements in international crude markets but are typically guided by average oil prices over the preceding fortnight or month.

As a result, any benefit from the recent correction in crude prices may take time to be reflected at the pump if lower international rates are sustained.

The easing in oil market tensions has also been reflected in the government's response. Inter-ministerial briefings that were instituted after the outbreak of the conflict have quietly been paused, signalling reduced concern over immediate energy supply disruptions.

The briefings, initially held daily and later scaled back to twice a week, brought together officials from key ministries to update the public on the country's preparedness and management of the crisis. Officials from the Ministry of Petroleum and Natural Gas were a regular presence, outlining measures taken to safeguard fuel supplies and maintain market stability.

No briefings were held this week on the scheduled days of Monday and Thursday, underscoring the government's assessment that risks to energy supplies and trade flows have eased following the de-escalation of hostilities and the retreat in oil prices.

The basket of crude oil that India buys averaged $71.17 per barrel on February 27 - a day before the US and Israel attacked Iran, resulting in sweeping retaliation by Tehran, which effectively shut the Strait of Hormuz that transited oil and gas from Gulf countries to user nations like India.

Indian Basket averaged USD 70.71 a barrel on June 24, according to data from Oil Ministry's Petroleum Planning and Analysis Cell (PPAC).

For the month (June), the Indian basket has averaged USD 86.31 per barrel as compared to USD 72.47 per barrel average for February 2026.

With Brent crude now back near pre-conflict levels, pressure is likely to mount on fuel retailers and the government to pass on some of the gains to consumers, particularly if crude remains below recent highs for an extended period. Lower fuel prices could further ease inflationary pressures and support consumer spending in Asia's third-largest economy.

The decline follows a normalisation of tanker traffic through the Strait of Hormuz, through which roughly one-fifth of global oil supplies pass. US officials said at least 20 million barrels transited the waterway over the past 24 hours, with flows nearing pre-war levels.

The impact

For India, which imports more than 88 per cent of its crude oil requirements, every $10-per-barrel fall in oil prices translates into billions of dollars in annual savings on its import bill and helps narrow the current account deficit.

The drop in crude prices is expected to ease pressure on retail inflation by lowering fuel, transportation and manufacturing costs. It could also reduce the burden of energy subsidies and improve government finances, providing policymakers with greater fiscal flexibility.

Lower oil prices are particularly beneficial for sectors such as aviation, paints, chemicals, logistics and consumer goods, where fuel and petrochemical derivatives are major input costs.

Shares of fuel-intensive companies have already responded positively, with investors betting on improved margins.

The fall in crude also strengthens the outlook for the rupee by reducing demand for dollars to pay for energy imports. A lower oil bill can help contain imported inflation and support domestic consumption, a key driver of India's economic growth.

Market participants said the sharp reversal highlights how quickly geopolitical risk premiums can unwind once fears of supply disruptions recede.

Brent crude has fallen more than 20 per cent this month and is roughly 30 per cent below the peaks reached during the conflict, as Gulf exports recover and concerns over shortages ease.

For the Reserve Bank of India, softer energy prices could further strengthen the case for maintaining an accommodative monetary policy stance if inflation remains contained, providing an additional boost to economic activity.

While analysts caution that geopolitical risks in the Middle East have not disappeared entirely, Thursday's move marks a return to pricing levels that prevailed before the conflict, delivering immediate relief to one of the world's most oil-dependent major economies.

Hormuz traffic rebounds

US Energy Secretary Chris Wright said shipments through the strait were approaching levels seen before the US and Israel launched strikes on Iran on February 28, with at least 20 million barrels exiting the strait in the previous 24 hours.

During the conflict, Iran took effective control of the vital chokepoint, disrupting oil flows and rattling global energy markets and the wider economy.

Despite the recovery in traffic, Iran signalled it would continue to assert control. Its Revolutionary Guards on Thursday warned vessels to stick to routes through the strait designated by Tehran, rejecting newly announced shipping routes not coordinated with Iran as unacceptable and dangerous.

(With inputs from PTI, Reuters)