Crude oil prices on the Multi Commodity Exchange of India (MCX) gained over 1% following a rally in international energy markets that reached the highest levels since November 2025. The surge comes amid escalating tensions between the US and Iran, raising concerns about potential supply disruptions from one of the world's major oil producers.

Market Performance and Price Movements

MCX crude oil prices demonstrated strong upward momentum, trading 1.48% higher at ₹5,414.00 per barrel. International benchmarks followed suit, with Brent crude oil rising 0.78% to $64.37 per barrel and US West Texas Intermediate (WTI) crude futures gaining 0.84% to $60.00.

Geopolitical Tensions Drive Price Rally

The price surge was primarily triggered by Trump's announcement of imposing 25% tariffs on goods from countries "doing business" with Iran. This development coincides with Iran facing significant anti-government demonstrations, prompting Trump to warn of possible military action over lethal violence against protesters.

According to Rahul Kalantri, VP Commodities at Mehta Equities Ltd, Trump's warning of potential military action has heightened concerns over Middle East stability and possible disruptions to Iranian oil exports, which represent a key component of global supply. Iran remains one of the biggest producers within the Organization of the Petroleum Exporting Countries.

Additional Supply Concerns

Beyond the US-Iran tensions, additional supply risks have emerged from Kazakhstan, where production faced impacts from adverse weather conditions, maintenance issues, and damage to Russian infrastructure linked to Ukrainian drone attacks. These factors have reinforced bullish sentiment in oil markets.

Markets are simultaneously grappling with concerns about additional crude supply potentially entering the market due to Venezuela's anticipated return to exports. Following the ouster of President Nicolas Maduro, Trump indicated that the government in Caracas is set to hand over as much as 50 million barrels of oil, previously subject to Western sanctions, to the US.

Technical Analysis and Price Outlook

Market analysts have provided specific technical levels for crude oil trading in the near term. Jigar Trivedi, Senior Research Analyst at Reliance Securities, noted that the trend for crude oil prices may remain positive for the upcoming weeks.

Kalantri expects crude oil prices to remain volatile, providing more detailed intraday levels. For today's session, crude oil has support at $58.70-$57.80 and resistance at $60.20-$60.90. MCX crude oil shows support at ₹5,280.00-₹5,210.00 and resistance at ₹5,415.00-₹5,485.00.

Impact on Indian Economy

India's heavy dependence on crude oil imports makes the country particularly vulnerable to price fluctuations. The nation currently imports approximately 89% of its crude oil requirements, with 45-50% of crude oil and 54% of Liquefied Natural Gas (LNG) imports passing through the Strait of Hormuz.

According to estimates, every $10.00 increase in crude oil prices widens trade deficits by roughly 0.3% of GDP, creating immediate downward pressure on the rupee. This directly impacts retail inflation, with the Consumer Price Index likely to rise by 25-30 basis points.

Aamir Makda, Commodity & Currency Analyst at Choice Broking, warns that the rupee, currently around ₹90.00-₹91.00 against the USD, could depreciate to ₹93.00-₹95.00 during prolonged conflict due to import-led depreciation, twin deficit threats, and RBI intervention limits. Foreign portfolio investors are likely to exit oil-sensitive sectors such as aviation and chemicals, shifting toward defensive sectors like IT and pharmaceuticals.

Crude oil markets concluded 2025 with their most significant annual decline since 2020, as persistent oversupply conditions dominated price dynamics throughout the year. The fundamental imbalance between production and consumption has created a structural surplus that analysts expect to continue shaping market conditions into 2026.

2025 Performance Overview

The oil market's performance in 2025 reflected the impact of sustained supply-demand imbalances across global markets.

The dominant factor driving prices lower was oversupply, as global production growth repeatedly outpaced consumption levels. This resulted in inventory builds through the second half of 2025, with US Energy Information Administration data showing implied stock builds among the largest since 2020. While periodic geopolitical tensions, including Israel-Iran conflicts in June and Russia-Ukraine infrastructure strikes, provided brief price support, the market's structural surplus ultimately prevailed.

Supply-Side Pressures Intensify

Multiple supply-side factors contributed to the oversupply conditions throughout 2025. OPEC+ began unwinding earlier production cuts, adding barrels to an already soft macroeconomic environment. Simultaneously, robust non-OPEC growth, led by record US output levels, further diluted any geopolitical risk premium in crude prices.

Tariff and sanctions adjustments by the US toward Russia, Iran, and Venezuela shifted global trade flows but failed to create lasting supply shortages. This allowed inventories to continue building despite the policy interventions. China's strong import activity largely fed strategic reserves rather than immediate consumption, muting demand signals and cushioning what could have been sharper price declines.

Venezuelan Political Developments

On January 3, 2026, US forces captured Venezuelan President Nicolas Maduro, transporting him and his wife to New York to face narco-terrorism and drug-trafficking charges. Both pleaded not guilty to the charges. This development has introduced uncertainty into global oil politics, given Venezuela's status as an OPEC founder nation with the world's largest proven reserves.

The immediate impact on global crude supplies remains limited due to Venezuela's constrained production capacity. Ongoing US sanctions and tanker blockades have already significantly restricted the country's exports. Brent oil prices have remained relatively stable near $60-61 per barrel, reflecting market skepticism that the political upheaval will translate into sustained supply disruptions.

2026 Market Outlook

Forecasts for 2026 indicate continued surplus conditions across global oil markets. The EIA expects production to exceed consumption, projecting global inventory builds averaging more than 2 mb/d. OPEC+ is forecast to maintain steady output levels into Q1 2026, which may limit volatility but will not eliminate the structural surplus.

The IEA has warned of a potential "super-glut" scenario, projecting a surplus of 3-4 mb/d if OPEC+ and rival producers continue adding supply faster than demand can absorb. On the demand side, growth remains modest with the IEA projecting increases of approximately 1.20 mb/d, concentrated primarily in Asian markets.

Key Market Factors

Several factors are expected to influence oil price movements throughout 2026:

• Supply discipline: OPEC+ production decisions will be critical in determining market balance
• Geopolitical risks: Middle East tensions and Russia-Ukraine developments could create short-term volatility
• Economic uncertainty: Slower-than-expected recovery in China and cautious monetary policies may temper demand growth
• Inventory levels: High global stock levels will limit the impact of temporary supply disruptions

Investor sentiment remains bearish, with most market participants expecting range-bound trading unless OPEC+ implements aggressive intervention measures or major supply disruptions occur. The consensus view suggests 2026 will be characterized by supply-driven dynamics, with prices likely fluctuating within established ranges unless unexpected market shocks alter the current trajectory.