Global crude oil prices climbed to a five-week high on Wednesday, with Brent crude rising above USD 94 per barrel amid escalating geopolitical tensions involving the United States and Iran. While the latest rally has renewed concerns over energy markets and inflationary pressures, analysts believe oil prices are more likely to remain in the USD 90-100 per barrel range in the near term unless there is a major disruption to global supplies.
At the time of reporting, Brent crude was trading at around USD 94.12 per barrel, while West Texas Intermediate (WTI) crude was quoted at approximately USD 87.38 per barrel.
The recent surge has been driven largely by heightened geopolitical uncertainty in West Asia, with investors closely watching developments that could affect oil production and shipping routes in one of the world's most important energy-producing regions.
According to Manoranjan Sharma, Chief Economist at Infomerics Valuation and Rating Ltd, the current rise in crude prices reflects growing geopolitical risks, relatively tight production levels maintained by the OPEC+ alliance and fears of potential disruptions to global energy supplies. However, he believes the market has not yet priced in a full-scale structural supply shock.
"Oil markets are clearly reflecting heightened geopolitical risk, relatively tight OPEC+ supply and the possibility of further disruptions to global energy flows. Yet current prices do not indicate that markets are fully pricing in a major, structural supply shock," Sharma said.
He noted that while crude prices could climb further, a sharp rally towards USD 112 per barrel would require a far more severe combination of events than those currently unfolding.
According to Sharma, such a scenario would likely involve a prolonged disruption in shipping through the Strait of Hormuz, one of the world's busiest oil transit routes, along with additional production losses in the region and a significant increase in speculative buying by financial investors.
"A move towards USD 112 would probably require a prolonged disruption in the Strait of Hormuz, further production losses in the region and a substantial increase in speculative positioning. While such an outcome cannot be ruled out amid continuing geopolitical tensions, it currently appears to be a tail-risk scenario rather than the most likely path for oil prices," he explained.
Sharma also pointed out that financial markets have become more cautious about predicting extremely high oil prices after earlier forecasts of USD 150-200 per barrel failed to materialise following previous geopolitical conflicts.
"Markets have become more cautious about extreme oil-price forecasts. Earlier projections of USD 150-200 a barrel after the outbreak of war did not materialise, suggesting that investors are already factoring in a significant geopolitical risk premium. A sustained move towards USD 120 is not impossible, but it would likely require a fresh and substantial escalation in regional tensions," he added.
Market participants are also awaiting fresh inventory data from the United States, which could influence short-term price movements. Deveya Gaglani, Senior Research Analyst – Commodities at Axis Direct, said investors are closely monitoring the latest US crude oil inventory figures, as any unexpected decline in stockpiles could provide additional support to prices.
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"Investors are closely monitoring crude oil inventory data due later today. Any unexpected drop in inventories could push NYMEX crude prices towards the USD 90 per barrel mark," Gaglani said. From a technical perspective, Gaglani noted that crude oil futures on the Multi Commodity Exchange (MCX) face immediate resistance near the 8,400 level, while 8,000 remains an important support zone. A decisive move above resistance could trigger further buying interest, whereas a break below support may encourage profit-booking.
The recent rise in crude prices has also revived concerns for major oil-importing countries such as India, where higher international oil prices can increase the import bill, widen the current account deficit and put upward pressure on domestic inflation. Rising crude prices also have implications for fuel costs, transportation expenses and manufacturing input costs across sectors.
Despite these concerns, analysts believe that unless geopolitical tensions escalate significantly or global oil supplies face prolonged disruptions, crude prices are unlikely to witness an unchecked surge. Instead, markets are expected to remain highly sensitive to geopolitical headlines, inventory data and production decisions by OPEC+, resulting in periodic volatility rather than a sustained upward spiral.
For now, investors and policymakers alike will continue to monitor developments in West Asia, movements in global oil inventories and any changes in production strategy by major oil-producing nations, as these factors are expected to determine the direction of crude prices in the weeks ahead.
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