Winning Bizness Desk

Mumbai.Global crude oil prices have climbed sharply once again as rising tensions between the United States and Iran rattled energy markets, pushing Brent crude above the crucial $90-a-barrel mark. The benchmark crude has jumped nearly 16% over the past week, its steepest weekly rise since April, raising fresh concerns over inflation, energy security and financial stability in India.

The rally is expected to increase pressure on the Indian rupee, foreign portfolio investment (FPI) inflows and fuel marketing companies. While refiners are benefiting from stronger refining margins, retail fuel sales have become significantly less profitable, especially in diesel.

Oil prices hit fresh multi-week high

Brent crude futures rose $2.69, or 3.05%, to touch $90.79 a barrel, marking the highest level since June 11. The benchmark has gained around 16% in just one week, reflecting growing fears of supply disruptions amid escalating geopolitical tensions in West Asia.

At the latest levels, Brent crude was trading at $88.43 per barrel, while US WTI crude stood at $82.40. India's crude basket was quoted at around $81 per barrel.

The latest spike comes as markets closely monitor the fallout of renewed hostilities between Washington and Tehran, with fears that crude shipments through key global oil routes could face disruptions if the conflict intensifies.

Warning signs for Indian economy

Market experts believe sustained crude prices above $90 could significantly increase India's economic challenges in the coming months.

Key concerns include:

• Higher imported inflation due to rising energy costs.
• Pressure on the rupee and foreign portfolio investment inflows.
• Increased burden on India's oil import bill.
• Possibility of higher fuel prices if government support weakens.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the biggest immediate concern for markets is the sharp rise in crude triggered by the US-Iran conflict. If elevated prices continue, India could once again face an energy shock. Bank of Baroda also warned that rising oil prices have revived global inflation concerns at a time when central banks remain cautious.

US rate hike fears return

The surge in oil prices has also strengthened expectations that the US Federal Reserve could keep monetary policy tighter for longer. According to a Bank of Baroda report, the probability of a rate hike in the Fed's September 2026 meeting has increased from 47% on July 16 to 52.4%, following recent comments from the Cleveland Fed President.

Other major developments include:

• US industrial production in May 2026 rose 0.1% month-on-month.
• Currency markets remained volatile, with the British pound witnessing the sharpest decline.
• The Indian rupee weakened alongside several Asian currencies.

According to HDFC Securities' Prime Research Head Devarsh Vakil, renewed attacks between the US and Iran, sectoral rotation in technology stocks and inflation worries ended the recent rally in American equity markets. Iran has also declared that the ceasefire has effectively collapsed, raising fears of disruptions to one of the world's busiest oil shipping corridors.

Fuel retailers under pressure despite refinery gains

The sharp rise in crude prices has squeezed the fuel retail margins of India's state-owned oil marketing companies, including BPCL, HPCL and IOCL. A weekly report by ICICI Securities said petrol marketing margins have fallen 42.1% week-on-week to Rs 4.5 per litre, while diesel sales are now resulting in losses of Rs 20.4 per litre compared with Rs 15.4 per litre a week earlier.

However, refining operations continue to provide a strong cushion. Gasoline crack spreads have climbed 15.8% to $27.3 per barrel, nearly 69% above the one-year average, while diesel crack spreads have surged 12.5% to $65.2 per barrel, almost double the one-year average. Tight global supplies following Russia's diesel export restrictions and continued West Asia tensions have supported refinery earnings.

Refiners likely to remain resilient

Despite weaker fuel retailing margins, analysts believe integrated refining and marketing profits remain comfortably above historical averages. Petrol's integrated margin has eased to Rs 21 per litre and diesel's to Rs 19.1 per litre, but both remain substantially higher than their respective three-month averages.

Key takeaways:

• Strong diesel refining margins may support earnings for another one to two quarters.
• Higher refinery utilisation could eventually normalise current exceptional margins.
• Crack spread refers to the difference between crude oil prices and refined fuel prices.
• Integrated margin combines refining and fuel marketing profitability to assess the overall financial health of oil companies.

Analysts expect refinery earnings to remain robust in the near term, even as geopolitical uncertainty and elevated crude prices continue to test India's inflation outlook and broader economic stability.