Oil prices below $100 keep India fuel costly in 2026

A crude market surprise after worst-case forecasts

Global crude oil has stayed below $100 a barrel despite severe geopolitical disruption around the Strait of Hormuz. Early in the conflict, parts of the market feared an oil shock that could push prices as high as $100 a barrel. Yet a set of workarounds has absorbed much of the impact, even after the loss of more than 10 million barrels a day of Middle Eastern supply. A pre-war surplus has also softened the immediate blow. For policymakers, including the US administration, lower-than-feared prices have kept negotiating space open even as public messaging has stayed focused on the possibility of a peace deal.

What is keeping oil under $100

Several factors have combined to prevent a sustained surge. Record US exports have added barrels into the global system at a time when buyers are cautious. China’s demand has slowed sharply and unexpectedly, reducing one of the biggest sources of incremental consumption. And despite disruption fears, a steady trickle of crude has continued to move through the Strait of Hormuz, limiting the worst supply gap scenarios priced by traders. Together, these forces have helped the market “absorb” a shock that would normally send prices substantially higher.

Dated Brent: from above $140 to below $100

The world’s most important physical crude benchmark, Dated Brent, surged to a record above $140 a barrel in the early phase of the war. Since then, it has retreated below $100. The article attributes part of that reversal to the twin forces of strong US exports and depressed Chinese buying. In parallel, nearly half of the released barrels referenced in the report sailed to Europe and other overseas destinations, showing how trade flows have been redirected rather than halted.

Russia-India flows rise as waivers reshape trade

A notable workaround highlighted is a waiver for some sanctioned Russian oil, which has made it easier for Indian processors to increase purchases. Russian crude flows to India averaged about 1.76 million barrels a day in May. That figure is 63% higher than in February, underlining how quickly refiners can adjust sourcing when regulations and pricing allow. India is the world’s third biggest importer of crude, so shifts of this scale can influence regional product markets and freight routes.

China’s return is the key variable traders are watching

Many traders cited in the report view China’s eventual return to its pre-Iran war oil purchasing rates as the key to predicting when prices could “lurch” higher. China’s appetite, described as over 10 million barrels a day since the start of the war in Ukraine, has been curbed for now. If that restraint eases while supply risks persist, the market could tighten quickly. This is also where shrinking oil stocks add risk, because lower inventories reduce the buffer against another disruption.

India’s puzzle: crude cools, but pump prices rise

Even with crude slipping below $100, petrol and diesel prices in India have continued to climb. The gap reflects delayed retail price revisions, earlier losses at state-run oil marketing companies (OMCs), a weaker rupee, heavy taxes, and ongoing geopolitical risk. Oil is bought globally in dollars, so a weaker rupee raises the import cost even if international crude prices fall. And with companies trying to recover earlier losses, the pass-through to consumers can stay firm even when crude retreats from peaks. The article also notes that $100 crude remains expensive for an oil-importing country like India.

Why the Strait of Hormuz matters so much to India

The Strait of Hormuz is described as carrying around 20% of the world’s energy supplies, making it a high-stakes chokepoint. The crisis has lasted several weeks, keeping this route under pressure and disrupting energy flows across markets. Crude is said to have jumped from around $10 before the conflict began to above $100, with Brent holding above $111 per barrel at one point. For India, which imports nearly 85% to 90% of its crude needs, these levels quickly translate into pressure on the import bill and the currency.

Macro transmission: inflation, rupee pressure, and policy constraints

Former BPCL marketing director Sukhmal Kumar Jain is quoted warning that India cannot remain insulated from the global oil shock, citing rising import costs and rupee depreciation. The article links higher crude to inflation risks, a weaker rupee, pressure on the RBI, and foreign investor outflows from emerging markets. One segment cites outflows of Rs 1.7 lakh crore and frames India as the only major market that did not recover in that period. RBI estimates cited in the report suggest every 10% rise in crude adds about 30 basis points to inflation and cuts 15 basis points from growth, if passed on to consumers.

Key figures mentioned in the report

Risk scenarios still in focus

Despite oil holding up “reasonably well” so far, the report lays out downside risks. It notes that even after a month of conflict, oil prices were up about 70%, which is significant but below some historical spikes. Some analysts warn that if flows through the Strait of Hormuz remain badly disrupted for another two months, Brent could rise above $120. Separate scenarios referenced include oil surging past $150, and even reaching $175 or $100, with consequences such as sharper rupee weakness, higher import costs, and broader inflation pressure. A worst-case description includes the possibility of the world losing up to 20 million barrels per day for an indefinite period if key chokepoints are blocked.

Conclusion: why India watches both crude and the rupee

Oil below $100 has reduced the probability of an immediate $100 shock, but it has not removed the strain for import-dependent economies. India’s fuel pricing is still being shaped by rupee weakness, taxes, and recovery of earlier OMC losses, even as global crude cools from recent peaks. Meanwhile, the next major swing factor remains whether demand, especially from China, returns while supply risks around Hormuz stay unresolved. Markets will keep tracking physical benchmarks like Dated Brent, inventory trends, and any changes in flows through the region over the coming weeks.