Crude oil prices are now expected to remain around $65 per barrel after US President Donald Trump announced a ceasefire between Iran and Israel, bringing relief to global markets.
According to a recent report by SBI, the price of oil depends heavily on Iran’s response to the recent tensions in the Middle East. The report laid out three possible scenarios, each with a different price impact.
Now, with the ceasefire announced, the third scenario of ‘ceasefire with Israel’ has come into effect, and crude oil prices are likely to stabilise around $65.
The report stated, “Different scenarios being built along the Iran-Israel conflict seem a little far-fetched, especially a worst-case scenario, on oil’s trajectory, given that any sharp increase in prices may not be a long-term phenomenon.”
As per the report, if Iran had chosen a path of substantial retaliation against the US and the conflict had widened regionally, oil prices could have jumped sharply, reaching as high as $130 to 140 per barrel. This would have created a major shock for oil-importing countries.
The second scenario considered symbolic retaliation by Iran and continued conflict with Israel, which would have kept crude oil prices steady around $80 to 90 per barrel.
Now, with a ceasefire officially declared by President Trump, the report suggested that the market is likely to follow the third and most optimistic path, with oil prices falling to around $65 per barrel in the coming weeks.
During the recent Israel-Iran-US conflict, crude oil prices had surged as high as $79 per barrel on Monday, reflecting market fears of further escalation.
However, the SBI report also pointed out that some of the extreme projections for oil prices, especially in the worst-case scenario, appear far-fetched.
The report further stated that the only event that could have led to sustained prices above the crude price of $130 would be the use of weapons of mass destruction by either side, a situation so severe that its cost cannot be measured through normal economic models.
United States President Donald Trump announced on Monday (local time) what he described as a “complete and total” ceasefire between Israel and Iran, stating that it would take effect in approximately six hours.
In a post on Truth Social, Trump said the ceasefire has been jointly agreed upon by both nations and would mark a significant de-escalation in hostilities that have gripped the region.
With tensions now easing, global oil markets may return to stability, which is a major positive for oil-importing countries like India. Lower oil prices will help reduce the current account deficit and support economic growth.
