The era of cheap crude oil may be drawing to a close as prolonged geopolitical tensions and infrastructure damage in West Asia threaten to keep global
energy prices elevated for an extended period, according to a recent report by SBI Caps. "Oil prices skyrocketed in the War to over USD 110/bbl only to fall below USD 100/bbl on announcement of the temporary ceasefire. Given some capacities have been put out for the long-term prices may take a while to return to pre-War levels," the report said. Even as intermittent ceasefire announcements have offered temporary relief to global markets, uncertainty around a durable resolution continues to cloud the outlook. Announcement of ceasefire and consequent drop in oil prices and appreciation of Rupee vs Dollar. In a separate report, Nomura also warned that a complete blockade of the Strait of Hormuz by the United States could disrupt oil supply materially. It pegged the incremental shortfall at around 2.3 million barrels per day in March 2026. Compared to March 2025, the shortfall is seen at 9.3mbpd, a sharp drop of 57 per cent year-on-year (y-o-y). Analysts at SBI Caps warned that key energy infrastructure in the Gulf has already suffered lasting damage, making a quick return to pre-war supply levels unlikely. “Some energy infrastructure… has been put out for good, entailing costly and time-consuming repairs, making cheap crude a fond memory,” the report noted. "Even if a permanent solution is reached to the War in a few weeks, some energy infrastructure in the Gulf has been put out for good, entailing costly and time-consuming repairs, making cheap crude a fond memory. The War also deepens the gash caused by tariffs, to cure which several governments are being forced to apply inflationary fiscal bandages," the report noted.
What lies ahead for India?
The report noted that for India, a country that relies heavily on crude imports, sustained high oil prices could have wide-ranging macroeconomic implications.
Higher import bills may exert pressure on the current account deficit and weaken the rupee, while also complicating the government’s fiscal math. Recent measures such as cuts in fuel levies to cushion consumers could further strain revenues, even as subsidy burdens rise.
RBI’s survey indicated that capacity utilisation in the manufacturing sector touched 75.6% in Q3FY26, which is above the long-term average. Though this is below the watermark considered to trigger capex, this could stimulate selective private capex. The quarter also witnessed a sharp increasing in backlog and pending orders
