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.