- Oil markets face uncertainty amid stalled US-Iran talks and rising West Asia tensions
- Reopening Strait of Hormuz could lower prices, but supply disruptions persist
- US considering strikes in Yemen raises concerns over Bab el-Mandeb Strait shipments
Oil markets are heading into another unsettled week, with stalled clarity over US-Iran talks and rising tensions across West Asia threatening to deepen concerns about global supplies.
A breakthrough on reopening the Strait of Hormuz could pull oil prices lower, but analysts warn that continued disruption to energy shipments may prevent a lasting retreat.
Traders will watch for fresh signals from diplomatic talks, while also assessing the latest monthly outlooks from OPEC and the International Energy Agency for clues on global oil supply and demand. Weekly inventory data from the American Petroleum Institute and the US government will also provide cues on supply-demand dynamics.
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Geopolitical concerns intensified after US President Donald Trump said Washington was considering joining Saudi Arabia in strikes against Iran-backed Houthi rebels in Yemen following an attack on Riyadh's international airport.
The widening conflict has raised concerns over energy shipments through the region, particularly the strategic Bab el-Mandeb Strait, according to Navneet Damani, head of research–commodities at Motilal Oswal Financial Services.
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On the Multi Commodity Exchange, crude oil futures for October delivery declined Rs 35, or 0.4%, last week to settle at Rs 8,881 per barrel. The November contract moved in the opposite direction, gaining Rs 82, or nearly 1%, to close at Rs 8,828 per barrel.
Damani said MCX crude holding above Rs 8,500 per barrel, compared with pre-war levels of around Rs 6,500, reflected the substantial supply-risk premium still built into prices. "Any favourable response from Iran to Washington's proposal could trigger a near-term correction," he said.
However, progress in diplomatic negotiations may not necessarily translate into a sustained recovery in physical supplies. Trump has said discussions between Washington and Tehran were constructive and that the US would not launch a military strike against Iran before the November 3 midterm elections.
Iran is evaluating Washington's response to its proposal on reopening the Strait of Hormuz.
Ajit Mishra, senior vice president–research at Religare Broking, said developments in US-Iran diplomacy would remain a key driver for global crude prices. A framework to reopen the strait could ease energy prices, potentially providing relief to India's import bill and the rupee. Any renewed escalation, however, could keep volatility elevated, he said.
Damani said the Strait of Hormuz remained severely constrained, with the recovery in exports during September largely dependent on alternative routes that are expensive, stretched and vulnerable to further disruption.
Global supply estimates are also being revised lower, while a meaningful recovery in Gulf supplies remains uncertain before 2027.
In international markets, Brent crude futures for December delivery rose $2.47, or 2.41%, last week to $104.72 per barrel. West Texas Intermediate crude gained 1% to settle at $91.85 per barrel in New York. WTI prices also received support from production disruptions in the US Gulf of Mexico following hurricane-related shutdowns.
Damani said this support could weaken as production resumes.
According to Choice Broking, attacks on 11 tankers in the Strait of Hormuz disrupted global logistics, pushed freight rates to record highs and created severe shipping bottlenecks. However, gains were capped after the US Treasury issued a temporary licence allowing Russia to release 22.5 million barrels of diesel into global markets.
Diplomatic de-escalation talks involving Western allies and Ukraine in Miami also offered some relief.
Crude oil prices are likely to remain volatile next week as diplomatic developments, supply disruptions and inventory data shape market sentiment, with geopolitical tensions continuing to drive trading decisions.
(With inputs from PTI)
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