Oil Prices Set To Ease After US-Iran Deal, Analysts Say Full Recovery Could Take Up To A Year

New Delhi: Crude oil and liquefied natural gas (LNG) prices are expected to moderate after signs of a potential US-Iran peace agreement and the reopening of the Strait of Hormuz. Analysts, however, caution that energy markets may remain volatile for several months due to supply disruptions, damaged infrastructure and tight inventories.

The prospect of normalised shipping through the Strait of Hormuz has already reduced geopolitical risk premiums. Brent crude has retreated about 20% from recent highs, while LNG benchmark prices have also softened.

Relief for India’s Fuel Sector

According to Sehul Bhatt, Director, Crisil Intelligence, lower crude prices and recent increases in domestic fuel prices have eased pressure on fuel retailers.

"The cumulative under-recovery on petrol, diesel and liquefied petroleum gas during March-May 2026 is estimated at approximately ₹1 lakh crore. If the Indian crude basket remains below $90 per barrel, under-recoveries are unlikely to increase materially from current levels," Bhatt said.

He added that softer crude prices would help contain inflation and reduce India's energy import bill. However, uncertainties surrounding the implementation of any peace agreement could continue to influence market sentiment.

Return to Pre-war Levels Unlikely Soon

Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, at ICRA Ltd, said oil prices could take six months to one year to return to pre-war levels.

He noted that nearly 10-11 million barrels per day of production remains shut in West Asia and some facilities have suffered damage. Vasisht also said that the removal of sanctions on Iranian crude would benefit India because of its proximity and favourable credit terms.

Supply Concerns Persist

Equirus Securities said the recent fall in prices reflects easing geopolitical fears rather than a fundamental change in supply-demand dynamics.

The brokerage expects crude to stabilise in the $75-80 per barrel range in the near term. A return to the $60-70 range appears unlikely even if the Strait of Hormuz fully reopens later this year.

Spot LNG prices, currently around $17-18 per million British thermal units, are also expected to remain above pre-crisis levels.

Analysts said shipping activity through the Strait of Hormuz could gradually recover over the next two to three months, although full normalisation of trade flows and infrastructure may take longer.