The Indian crude oil basket, a blend of sour (Oman and Dubai average) and sweet (Brent dated) grades processed by domestic refineries, climbed to $115.98 per barrel on September 9th, according to data from the Petroleum Planning and Analysis Cell. This surge marks a significant increase from an August average of $90.19, with the basket averaging $104.09 a barrel for September so far, a rise of 15.41%.
Crude Price Surge Driven by Geopolitical Tensions
The sharp increase in crude prices is primarily attributed to an escalation in US-Iran tensions and mounting threats to shipping through critical choke points, particularly the Strait of Hormuz. These disruptions are severely impacting global crude flows and have reignited concerns about physical damage to Gulf refining and production infrastructure. The reintroduction of a geopolitical risk premium into the market is evident, with no immediate prospects for a diplomatic resolution in sight.
Brent crude futures for November delivery hit a high of $101.94 per barrel on September 10th, underscoring the market's sensitivity to these developments. N S Ramaswamy, Head of Commodity & CRM at Ventura, noted that Brent crude's return to triple-digit prices has triggered immediate warning signs across global financial systems. Vulnerable economies face renewed threats of increasing import bills, widening current account deficits, and challenges to currency stability and fiscal health, all contributing to global inflation worries and concerns over economic growth.
Analysts Revise Brent Crude Forecasts Upwards
In response to the volatile market conditions, leading financial institutions have revised their crude oil price forecasts upwards:
- HSBC: Raised its 2026 average Brent crude forecast to $90 a barrel, up from $80, citing threats to shipping in the Strait of Hormuz.
- Goldman Sachs: On September 8th, upped its Brent forecast to $85 a barrel for December 2026 and $80 a barrel for 2027.
- Choice Institutional Equities: Expects Brent to average $84 per barrel for FY27 and $86 per barrel for the ongoing July-September quarter. They stated, "Renewed US-Iran escalation and continued disruption through the Strait of Hormuz should keep a geopolitical premium embedded in crude, with Brent likely to remain elevated unless there is a credible path towards de-escalation."
These revised forecasts highlight the market's expectation that geopolitical factors will continue to exert significant upward pressure on crude oil prices, complicating the task for central banks globally as they navigate interest rate outlooks amidst persistent inflationary pressures.