Escalating tensions in the Middle East and renewed military activity around the Strait of Hormuz have once again shaken global markets, with crude oil prices volailte and concerns over inflation and interest rates still brewing.
Brent crude, which has surged over 55% since the conflict began on February 28, wee trading around $99 per barrel, while West Texas Intermediate was near $93 on Wednesday, 27 May amid fears of prolonged supply disruptions.
The latest volatility followed fresh U.S. strikes in Iran, Iranian accusations of ceasefire violations, and growing uncertainty over negotiations to reopen the Strait of Hormuz — a critical route carrying nearly one-fifth of global oil and LNG shipments. At the same time, Israel intensified bombing operations in Lebanon, further straining diplomatic efforts in the region.
Strait of Hormuz tensions keep oil markets on edge
The Strait of Hormuz remains the central concern for global markets as any prolonged disruption in the region could severely impact global energy supplies and shipping flows. Analysts believe that while markets have already priced in some geopolitical risks, they may still be underestimating the possibility of a prolonged supply shock or infrastructure damage.
Ruchit Thakur, Market Analyst at VT Markets, said, “Crude oil markets remain highly sensitive to geopolitical developments, particularly around the Strait of Hormuz, which continues to be a major risk for global energy flows. Markets are still not fully reflecting prolonged supply disruption possibilities.”
Thakur noted that the recent rally in oil prices has been driven by geopolitical risk premiums, tighter supply conditions, higher shipping costs, and OPEC production discipline. However, he added that weaker global demand conditions, especially from Europe and China, may limit the sustainability of any rally above $110–120 per barrel unless disruptions worsen materially.
He further cautioned that elevated crude prices are increasing inflationary risks globally, complicating the U.S. Federal Reserve’s monetary policy path and potentially delaying rate cuts. According to him, investors will closely monitor developments around Hormuz, OPEC supply decisions, inflation trends, and central bank commentary as volatility across energy and financial markets remains elevated.
How does crude shock impact your portfolio
The surge in crude oil prices is already creating clear winners and losers across Indian markets, with energy-linked companies benefiting while fuel-sensitive businesses face mounting pressure on profitability. Fund houses and brokerages believe that sector selection will become increasingly important if oil prices remain elevated for a prolonged period.
Tata Mutual Fund said the recent spike in crude prices, along with strong gross refining margins, has benefitted upstream companies and pure refiners, leading to a sharp rise in their stock prices. However, the fund house warned that oil marketing companies are facing severe profitability pressure because higher crude prices are resulting in marketing losses.
The fund house added that while the government has taken certain steps to improve the situation, those measures remain inadequate at present. Tata Mutual Fund also said policy support for city gas distribution companies may improve medium-term volume growth, although ongoing disruptions in West Asia continue to increase input costs and pressure profitability.
Emkay Global Financial Services maintained a constructive long-term stance on Indian equities despite geopolitical uncertainties and elevated oil prices, projecting the Nifty to touch 29,000 by March 2027 at a valuation multiple of 19.2x FY28 earnings. The brokerage said India’s macroeconomic resilience, improving earnings trajectory, and policy support continue to provide a strong foundation for long-term growth despite near-term volatility.
The brokerage noted that the Nifty is currently trading near its five-year average valuation at around 19.2x FY27 forward earnings. It believes that any sharp correction driven by global concerns should be viewed as a tactical buying opportunity rather than a structural risk to India’s long-term growth outlook. Emkay remains overweight on discretionary consumption, materials, industrials, and real estate, while staying underweight on financials, energy, healthcare, staples, telecom, and technology in the near term.
Emkay also warned that prolonged elevated oil prices could materially impact India’s macroeconomic stability because of the country’s dependence on energy imports. According to its scenario analysis, if Brent crude sustains at $100 per barrel, India’s current account deficit could widen to 2.4% of GDP from the earlier estimate of 1.3%, while GDP growth may moderate to 6.3% from 7%. CPI inflation could rise to 4.6%.
In a more extreme scenario where crude prices surge to $130 per barrel, Emkay estimated that GDP growth could decline further to 5.5%, while inflation may rise to 5%, increasing pressure on policymakers and household consumption.
Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services, said, “While global geopolitical developments and elevated crude prices may continue to create intermittent volatility, India’s structural growth drivers remain intact. We believe any near-term market weakness should be viewed as an opportunity for long-term portfolio positioning.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
