Oil Prices Ease: Neither Russia-Ukraine War Nor Iran Crisis Can Stop the Fall—Why India Stands to Gain

Crude oil prices have eased once again, as fears of a potential U.S. strike on Iran have subsided. Analysts say that global supply currently exceeds demand, providing a major advantage to oil-importing countries like India. Lower petrol and diesel prices will help curb inflation and free up government funds for developmental spending.

Decline in Crude Prices
The drop in oil prices follows a reduction in concerns over a U.S. military strike on Iran. Previously, Brent Crude and WTI (West Texas Intermediate) had reached their highest levels in months, challenging earlier predictions of a sluggish year. While traders were caught between geopolitical fears and fundamental market factors, most analysts now agree that crude oil supply significantly exceeds global demand. Goldman Sachs recently revised its 2026 price forecast, predicting further declines in Brent Crude—news that is particularly favorable for India, which imports over 85% of its crude oil needs.

Earlier, U.S. President Donald Trump had hinted that military action against Iran could not be ruled out, temporarily driving oil prices up. However, subsequent reports that Iran had eased its crackdown on protesters reduced the likelihood of conflict, triggering a fall in oil prices that continues today. This trend underscores the dominance of supply in the current oil market, leaving no factor capable of halting the decline.

Major energy forecasters, including the U.S. Energy Information Administration (EIA) and the International Energy Agency (IEA), continue to project rising oil supply. This is happening even as OPEC has paused the reversal of production cuts implemented in 2022 to support prices.

Why India Benefits
India is the world’s third-largest oil consumer, importing nearly 88% of its crude requirements. Global oil prices directly impact the country’s economy—from household budgets to the national treasury. Rising international prices increase India’s import bill, push up demand for dollars, weaken the rupee, and expand the fiscal deficit. Transportation costs rise, goods become more expensive, and sectors like aviation, tires, and paints face higher input costs, putting pressure on the stock market.

Currently, abundant global supply and falling crude prices are an “economic boon” for India. If crude prices remain around $50–$60 per barrel, petrol and diesel prices in India could drop, helping control inflation and enabling the government to allocate more funds for infrastructure projects. Lower oil prices also reduce the country’s foreign exchange burden.

Impact on Supply and Demand
Goldman Sachs noted this week that with global oil inventories rising and an estimated surplus of 2.3 million barrels per day in 2026, prices will likely fall to restore market balance. This could slow non-OPEC supply growth and strengthen demand—unless major supply disruptions occur or OPEC implements new production cuts.

Meanwhile, U.S. measures against Venezuela’s oil industry have naturally influenced global prices. Washington recently sold the first batch of Venezuelan crude for $500 million, with further sales expected. While this reinforces a bearish mood, industry experts caution that Venezuela could rapidly increase production, slightly offsetting the downward trend.

Supply concerns persist in other regions as well. Drone attacks on three tankers in the Black Sea, coupled with potential disruptions to Iranian oil flows, have kept the market alert. Kazakhstan also experienced a 35% drop in oil output during the first two weeks of January, due in part to attacks on the Caspian Pipeline Consortium by Ukrainian forces. The Kazakh government has sought assistance from the U.S. and the European Union to secure oil transport via the Black Sea.

In Europe, reports indicate that Brussels plans to further lower the price cap on Russian oil, tying Western insurance coverage to the limit to reduce Russia’s oil revenues. Starting next month, the new cap will be $44.10 per barrel. While price caps have had limited impact on Russia’s budget so far, the EU considers them a strategic tool to pressure Moscow to reduce its military actions in Ukraine.