At the peak of the Iran crisis, crude oil surged to nearly $120 a barrel and fuel prices climbed. Now, with oil back below $80 after the Iran-US deal, many expect petrol and diesel prices to fall as well. But that relief may not come anytime soon.

Union Minister of State for Petroleum and Natural Gas Suresh Gopi on Thursday said that global crude oil prices have fallen below $80 a barrel after easing tensions in West Asia, but consumers should not expect an immediate reduction in fuel prices.

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Speaking to reporters, Gopi said fuel prices cannot be reduced instantly when international crude prices decline because of the time lag involved in procuring and transporting cheaper oil to India.

"It will take time as the cheaper crude has to be transported to India via the Strait of Hormuz, which will see an excessive traffic of ship movement. So things will have to be normalised," he said.

Gopi said only about Rs 3.94 per litre of the recent increase in fuel prices had a direct impact, but that increase could not be rolled back immediately merely because crude prices had softened.

Centre absorbed part of the shock

The minister said Indian oil companies faced significant pressure after the conflict in West Asia escalated earlier this year and that the Centre had absorbed part of the impact.

"By absorbing the impact, the Centre lost Rs 12,000 crore. None of the states reduced their revenue by charging a lesser excise duty on the higher fuel prices. The central government has to run, and the oil companies have to survive," Gopi said.

Brent crude, the global benchmark, had surged to nearly $120 per barrel at the height of tensions in West Asia. Prices have since eased to below $80 after Iran and the US agreed on a memorandum of understanding aimed at ending the months-long conflict.

Analysts see risks despite easing tensions

While crude prices have retreated sharply, analysts remain divided on how quickly global oil markets can return to normal.

Goldman Sachs has cut its oil price forecasts, citing expectations that exports from the Persian Gulf will normalise sooner than previously anticipated. The brokerage lowered its Brent forecast for the fourth quarter of 2026 to $80 per barrel from $90 and reduced its 2027 average forecast to $75 from $80.

Emkay Global, however, warned that markets may be underestimating near-term supply constraints despite the diplomatic breakthrough.

"Supply normalisation via Hormuz is likely to take weeks, if not months," the brokerage said, pointing to logistical bottlenecks, higher insurance costs, tanker availability issues and lingering security concerns.

Emkay added that crude prices could move back toward or even above $90 per barrel in the coming weeks.

The brokerage also expects a recovery in Chinese oil imports after months of inventory drawdowns and weaker refinery activity. Combined with low global inventories and efforts by several countries to rebuild strategic reserves, demand could continue to outpace supply through 2026.

What it means for India

According to ICICI Securities, the removal of the conflict-related premium of $10-$15 per barrel could lower India's crude import bill by $1.5-$1.8 billion every month.

Lower crude and gas prices could also improve profitability for refiners, city gas distributors and LNG infrastructure companies.

At the same time, the brokerage said upstream producers such as ONGC and Oil India would remain profitable even if crude stabilises around $80 per barrel, supported by expected production growth over the next two years.

For now, however, lower global crude prices are unlikely to translate into immediate relief at the fuel pump, with policymakers and analysts warning that the path to normalisation could take time even after the easing of tensions in West Asia.
 

Published on: Jun 18, 2026 1:09 PM IST