New Delhi

Crudeoil and liquefied natural gas (LNG) prices are expected to moderate following signs of a potential US-Iran peace agreement and the reopening of the Strait of Hormuz, although analysts cautioned that supply disruptions, damaged infrastructure and tight inventories could keep energy markets volatile for months.

The prospect of normalised shipping through the strategically important Strait of Hormuz has already triggered a sharp decline in geopolitical risk premiums, helping Brent crude retreat about 20 per cent from recent highs, while LNG benchmark prices have also softened.

“The potential reopening of the Strait of Hormuz, amid signs of de-escalation in the West Asia conflict, has triggered a sharp decline in geopolitical risk premiums in energy markets,” said Sehul Bhatt, Director, Crisil Intelligence.

Bhatt said the decline in crude prices, coupled with recent increases in domestic fuel prices and reductions in excise duties, had largely offset under-recoveries on automobile fuels, easing pressure on petrol and diesel marketing margins.

“The cumulative under-recovery on petrol, diesel and liquefied petroleum gas during March-May 2026 is estimated at approximately Rs1 lakh crore. If the Indian crude basket remains below $90 per barrel, under-recoveries are unlikely to increase materially from current levels,” he said. Lower crude prices would also help reduce inflationary pressures, and India’s energy import bill, Bhatt added, though he cautioned that it could take weeks or months for global oil and gas markets to fully normalise.

“While the risk of prolonged supply disruption has eased, it may take several weeks or months for crude oil and LNG markets to fully normalise,” Bhatt said. “In the near term, uncertainties around the implementation of the peace deal could continue to drive volatility in energy markets.”

Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA Ltd, said a successful US-Iran agreement would ease crude and gas prices, but a return to pre-conflict levels could take significantly longer.

“Crude prices could take six months to one year to normalise to pre-war levels, given that almost 10-11 million barrels per day of production has been shut in West Asia, besides which some facilities have suffered damage,” Vasisht said.

He added that the removal of sanctions on Iranian crude would be beneficial for India because of geographical proximity and historically favourable credit terms offered by Tehran.

Analysts at Equirus Securities said the market reaction so far reflected a reversal of geopolitical fears rather than a fundamental shift in supply-demand dynamics.

“Brent fell to around $82-84 per barrel immediately post-deal announcement as markets unwound the geopolitical risk premium,” said Maulik Patel, Head of Research at Equirus Securities.

New Delhi

Thegovernment on Monday hiked windfall gains tax on exports of diesel and aviation turbine fuel (ATF), while retaining the levy on petrol for the fortnight beginning June 16.

The rate of special additional excise duty (SAED) on export of diesel will be Rs14/litre, up from Rs13.5/litre at present. SAED on export of ATF will be Rs 12.5/litre, up from Rs9.5/litre.

There is no change in the rate of duty on exports of petrol and it continues to be at Rs1.5 per litre. The Finance Ministry in a notification said the duty hikes will be effective from June 16.

Also, there is no change in the existing duty rates on petrol and diesel cleared for domestic consumption.

Amid escalating tensions in West Asia caused by the US-Israel attack on Iran, followed by sweeping retaliation, the government had on March 26 imposed an export duty on diesel and ATF and revised the rate every fortnight. On May 16, it levied export duty on petrol.