In a base case scenario that assumes de-escalation of Iran war, global brokerage Macquarie expects prices to remain elevated, with Brent finding support in the $85–$90 range and gradually inching back towards $110 as flows through the Strait of Hormuz normalise only slowly.
Echoing this cautious outlook, Ajit Mishra, Senior Vice President at Religare Broking, noted that the ceasefire is limited to two weeks and a full return to pre-war levels of $70–$75 could take months. In the near term, he does not expect a sharp correction, pegging crude in the $80–$85 range on the downside and $95–$100 on the upside, with a gradual move towards $80 possible over time if supply conditions improve and demand softens.
Persistent supply tightness, infrastructure damage, and a sustained geopolitical risk premium, are major factors behind the new base. Domestic brokerage Ambit further highlights a physical market deficit of around 7 mbd and the need for urgent strategic petroleum reserve restocking, suggesting that the current shock represents not a temporary spike, but a deeper repricing of geopolitical risk across the global energy supply chain.
How is India positioned?
Valuations attractive: Some market veterans see these weak conditions as a potential turning point. The Nifty’s 12-month forward P/E has compressed to 17x, close to its pre-Covid (January 2015–20) average and at a 12% discount to the last five-year average, according to Jefferies. The index is down 12% year-to-date and has remained flat over the past two years, bringing valuations to roughly one standard deviation below the 10-year average.
Sanjeev Prasad, Managing Director and Co-Head at Kotak Institutional Equities, said earnings downgrades for FY2027E and FY2028E could remain limited if the Iran-Israel/US conflict ends within the next 2–3 weeks and oil and gas supply conditions improve over the coming months.
Will FIIs make a comeback? Foreign institutional investors (FIIs) have unleashed an unprecedented retreat from Indian equities, ripping nearly Rs 1.2 lakh crore, over $12 billion, out of Dalal Street in March alone, marking the worst monthly selloff in the market’s history. V K Vijayakumar, Chief Investment Strategist at Geojit said: If their sustained selling strategy is to change, there should be an end to the hostilities in West Asia and decline in crude prices.”
Sahil Kapoor of DSP Mutual fund highlights what foreign investors now see: more reasonable valuations, pockets of cheap quality stocks in large liquid firms, and an Indian rupee near one of its weakest real effective exchange rate levels in years. Critically, many of India’s macro stresses appear near their peak—meaning they’re more likely priced in than ignored.
Mishra said crude remains a factor from an economic standpoint, but valuations and the earnings season will play a bigger role in driving foreign flows. He expects selective participation rather than broad-based buying.
RBI intervention and ceasefire to help Rupee? – Directives by the RBI earlier to curb excessive speculation in the currency markets have yielded results and the rupee has appreciated to 92.59 levels from 95.30 touched on March 30.
USD/INR is currently trading near the 92.6 level after cooling from highs around 94.8, supported by RBI intervention and easing geopolitical tensions. A move above 93 could push the pair toward 93.5–93.8. On the downside, immediate support is placed at 92.4, with stronger support near 92.2. The near-term structure indicates mild rupee strength supported by improving global sentiment.
Will inflation flare up? During the RBI MPC meeting, Governor Sanjay Malhotra said headline inflation remains contained and below the target. However, upside risks to the inflation outlook have increased, driven by higher energy prices and potential weather-related disruptions impacting food prices. Core inflation pressures remain muted, though supply chain disruptions and the risk of second-round effects make the future inflation trajectory uncertain.
Taking these factors into account, CPI inflation for FY27 is projected at 4.6%, with Q1 at 4.0%, Q2 at 4.4%, Q3 at 5.2% and Q4 at 4.7%. Core inflation is estimated at 4.4%, and even lower when excluding precious metals, indicating that underlying inflation pressures are expected to remain contained, though risks remain tilted to the upside.
Oil sensitive stocks in trouble: Downstream stocks witnessed steep corrections over 20% in March, with HPCL, BPCL, IOCL plunging the most. “Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future, and the market will price in heightened risk to the Strait of Hormuz going forward,” MST Marquee analyst Saul Kavonic, told Reuters.
Last month, international brokerage firm UBS downgraded HPCL, BPCL, and IOCL The international brokerage revised target prices to Rs 175 for IOCL from Rs 190, Rs 365 for BPCL from Rs 425, and Rs 340 for HPCL from Rs 540.
Oil marketing companies are the most vulnerable, Elara Securities said in a note. Higher gross refining margins may offer some cushion, but they are unlikely to fully offset the hit from shrinking retail margins and rising LPG losses. Brent levels of around $105 per barrel, earnings could decline sharply, in the range of 90% to 190%, unless there is a fuel price hike, tax cuts or higher LPG subsidies.
Crude to widen current account deficit: Elevated crude oil prices could push up imported inflation and widen the current account deficit. However, continued strength in services exports and steady inward remittance flows during Q4 FY26 are expected to keep India’s current account deficit at a moderate and sustainable level for FY26.
That said, rising global uncertainties and persistently high energy prices pose upside risks to the current account deficit outlook for FY27.
While the ceasefire has eased immediate concerns and lifted market sentiment, the broader macro picture remains finely balanced. Crude oil is likely to stay elevated, keeping pressure on inflation, external balances and corporate earnings, even as pockets of opportunity emerge from cooling valuations. The trajectory of global cues, energy prices and earnings momentum will be critical in determining whether the current relief rally sustains or gives way to a more measured, selective recovery in the months ahead.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)