Crude oil prices are expected to witness sharp fluctuations next week as investors assess the prospects of a US-Iran agreement to reopen the Strait of Hormuz against the risk of further supply disruptions in Middle East. Analysts said any diplomatic breakthrough could bring prices down, although continued restrictions on oil shipments and escalating regional tensions may limit the decline.“Crude oil is caught between diplomatic optimism and persistent physical supply risks. MCX crude holding above Rs 8,500, against pre-war levels near Rs 6,500, highlights the significant supply-risk premium still embedded in prices,” Navneet Damani, Head of Research – Commodities at Motilal Oswal Financial Services Ltd, said, as quoted by PTI.The direction of prices will largely depend on developments in Washington and Tehran. US President Donald Trump has described negotiations as constructive and said Washington would not launch a military strike against Iran before the November 3 midterm elections. Iran, meanwhile, is evaluating the US response to its proposal for reopening the Strait of Hormuz.Analysts believe a positive response from Tehran could trigger a near-term correction in oil prices. However, uncertainty over the restoration of supplies through the strategic waterway is likely to keep a geopolitical risk premium in place.“Globally, developments around US-Iran diplomacy and crude oil prices will remain critical. Any progress on a framework for reopening the Strait of Hormuz could ease energy prices and provide some relief to India’s import bill and the rupee, while renewed geopolitical tensions could keep volatility elevated,” Ajit Mishra, SVP – Research, Religare Broking, said.The Strait of Hormuz remains severely constrained, with September’s improvement in oil exports largely supported by alternative shipping routes. Damani noted that these routes remain expensive, stretched and vulnerable to further disruption, suggesting that even a diplomatic breakthrough may not immediately restore normal supply conditions.Further uncertainty has emerged following Trump’s remarks that the US was considering joining Saudi strikes against Iran-backed Houthi rebels in Yemen after an attack on Riyadh’s international airport.“The widening conflict has heightened concerns over energy shipments through the region, including the strategic Bab el-Mandeb Strait,” Damani said.According to Choice Broking, attacks on 11 tankers in the Strait of Hormuz have pushed freight rates to record highs and created severe shipping bottlenecks. Any further disruption to these routes could keep crude prices elevated in the coming sessions.Meanwhile, traders will also assess the impact of hurricane-related production shutdowns in the US Gulf of Mexico. The disruptions supported West Texas Intermediate (WTI) crude prices towards the end of last week, although that support could weaken as production resumes.Damani said global supply expectations continued to be revised lower, with a meaningful recovery in Gulf supplies uncertain before 2027.On the data front, investors will closely follow the monthly oil market reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) for fresh estimates of global oil demand and supply.Weekly crude inventory figures from the American Petroleum Institute, along with US government data on crude stocks and imports, will also provide direction to prices.The market will additionally assess the impact of the US Treasury’s temporary licence allowing Russia to release 22.5 million barrels of diesel into global markets. According to Choice Broking, the measure helped limit price gains, while diplomatic de-escalation discussions involving Western allies and Ukraine in Miami provided some relief.Crude oil prices ended the previous week with mixed movements. Brent futures for December delivery rose $2.47, or 2.41 per cent, to $104.72 per barrel, while WTI gained 1 per cent to settle at USD 91.85 per barrel.In the domestic market, October crude futures on the Multi Commodity Exchange (MCX) declined Rs 35, or 0.4 per cent, to Rs 8,881 per barrel. The November contract gained Rs 82, or nearly 1 per cent, to Rs 8,828 per barrel.With Brent trading above $100 per barrel, analysts expect geopolitical developments to remain the dominant driver of oil prices next week. While progress in US-Iran negotiations could provide some relief, the risk of renewed attacks, shipping disruptions and prolonged supply constraints is likely to keep volatility elevated.
