US-Iran war: Crude oil prices on Multi Commodity Exchange (MCX) rose as much as 4% to ₹7,718 per barrel on Wednesday, March 11, despite a fall in Brent crude prices.
On the international front, Brent crude prices slipped 0.26% to $87.57 per barrel, while West Texas Intermediate (WTI) crude futures dropped 0.44% to $83.08 on Wednesday, extending their fall after an over 11% decline in overnight trade.
The decline follows reports that the International Energy Agency (IEA) has proposed the largest release of oil reserves in its history to ease crude prices, which had surged amid the US-Iran conflict.
Oil prices dropped had declined in the last trade as markets reacted to rapidly changing statements from the Trump administration regarding the war and shipping activity through the Strait of Hormuz.
Trump has repeatedly said the US is prepared to escort tankers through the Strait of Hormuz when necessary. However, sources told Reuters the US Navy has refused requests from the shipping industry for military escorts as the risk of attacks is too high for now.
Why are MCX crude oil prices rising even as Brent falls?
Despite the weakness in Brent crude prices, crude oil on the MCX is seen rising, as domestic and macroeconomic factors are offsetting the decline seen in Brent, according to market experts.
Kaveri More, Commodity Analyst at Choice Broking, believes that the primary driver is the depreciation of the Indian rupee against the US dollar, which increases the effective import cost of crude for India since MCX contracts are rupee-denominated, while Brent trades in dollars.
Even a small fall in Brent can translate into higher domestic prices when the currency weakens.
At the same time, rising geopolitical uncertainty surrounding the US–Iran conflict has added a risk premium to oil markets, with investors pricing in potential supply disruptions despite statements from Donald Trump suggesting the conflict could ease soon, More noted.
Added to this, major Middle Eastern producers continue to maintain significant production restraint, with collective output cuts exceeding 6 million barrels per day, tightening global supply expectations.
Meanwhile, Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities, said that the apparent rise in MCX prices despite Brent slipping intraday is largely a catch-up effect rather than a structural disconnect between the two markets.
“There is no real divergence between global and domestic crude prices. What we are seeing is simply a timing mismatch. Brent crude rallied after Indian markets had closed overnight, and although it has eased slightly since then, MCX crude is now adjusting to that earlier global move,” Banerjee said.
US-Iran war impact on crude oil prices
The conflict in the Middle East, now in its second week, has pulled more than a dozen countries into the confrontation and raised fears of a fresh inflationary surge. US retail gasoline prices have climbed sharply, adding further pressure on Donald Trump.
Meanwhile, Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait have collectively reduced oil output by as much as 6.7 million barrels per day, equivalent to about 6% of global supply, according to a Bloomberg report on Tuesday. In addition, the largest oil refinery in the UAE suspended operations after being hit by a drone strike.
“If Iran has put out any mines in the Hormuz Strait, and we have no reports of them doing so, we want them removed, IMMEDIATELY!” Trump posted on Tuesday on social media. He said removing them would be “a giant step in the right direction!”
According to reports, around 40% to 50% of India’s crude oil imports pass through the Strait of Hormuz.
(With inputs from agencies)
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
