Analysts note that oil prices are entering a new volatile week. Rising geopolitical tension in West Asia is fueling supply concerns, while the US Federal Reserve's monetary policy decision is expected to determine market direction.
With Brent crude already exceeding $117 per barrel, investors are closely monitoring events in the Strait of Hormuz, threats to energy infrastructure, and weekly US inventory data to gauge the market's next move.
The release of weekly inventory estimates from the American Petroleum Institute and the U.S. Energy Information Administration is anticipated. Attention will also be focused on crude oil stocks in Cushing and the Federal Reserve's Open Market Committee meeting scheduled for October 27–28.
Analyst views on market trends
Ajit Mishra, Senior Vice President of Research at Religare Broking, stated that the short-term outlook remains bullish, but it is heavily dependent on news headlines. He advised traders to avoid chasing sharp rallies and to monitor the geopolitical situation, Fed guidance, and weekly inventory data to confirm the direction of movement.
Mishra added that any disruption to energy infrastructure or shipping through the Strait of Hormuz could push crude oil prices to $120 per barrel in global markets, whereas convincing progress in de-escalation could trigger a sharp correction.
Mishra noted that the rise in domestic prices occurred against the backdrop of escalating tensions between the US and Iran, fears of renewed military action, Houthi attacks on Saudi infrastructure, and threats to critical sea lanes. He warned that a prolonged period of high oil prices could put pressure on the Indian rupee, inflation, the current account, and corporate margins.
In external markets, December Brent crude futures rose by $7.52, or nearly 7 percent, last week, reaching $117.38 per barrel on the Intercontinental Exchange. West Texas Intermediate (WTI) futures for the same month also advanced by $4.25, or 4.3 percent, closing at $103.27 per barrel on the New York Mercantile Exchange.
Factors influencing price growth
Navneet Damani, Head of Commodity Research at Motilal Oswal Financial Services Ltd., observed that the rally accelerated as attention returned to the escalation of attacks around Hormuz and Saudi Arabia, reigniting concerns over export security and energy infrastructure.
Additional concern was raised by reports that the US and Israel had developed plans to attack Iranian energy infrastructure, including nuclear facilities near Natanz, following the US midterm elections on November 3. Iran later warned of potential consequences if Washington and Tel Aviv initiated an attack, heightening market anxiety.
Supply intervention measures have not provided significant relief. The International Energy Agency's readiness to release further strategic reserves, an additional 100 million barrels from the G7 (mainly accelerating an existing program), and the first shipment of Russian diesel fuel heading to the US have failed to halt the rise.
Damani emphasized that the market is increasingly focusing on whether these events can provide substantial additional supply, rather than just announcements. He added that despite some recovery in oil flows through the Strait of Hormuz, high freight rates, limited regional supplies, and persistent security threats continue to undermine export reliability. Since physical supply has not yet normalized, the risk premium remains high, and the risk balance continues to lean towards growth, although convincing progress in de-escalation could still cause a sharp profit-taking.
The Fed meeting will be another test for oil prices, as investors assess how policymakers view inflation amidst rising energy costs. Mishra suggested that 'a hawkish tone could strengthen the dollar and put pressure on demand-sensitive commodities, although supply disruptions could limit the fall in crude oil prices.'