New Delhi: Crude oil futures fell Rs 316 to Rs 5,730 per barrel on Tuesday as hopes of a ceasefire between Iran and Israel, coupled with weaker spot demand, prompted participants to trim their positions.
On the Multi Commodity Exchange, crude oil for July delivery declined Rs 316 or 5.23 per cent to Rs 5,730 per barrel in 10,985 lots.
Analysts said the prices were affected following participants offloading their holdings amid weak demand in the spot market.
“The prospect of a prolonged conflict with US involvement has been repriced, giving the green light to add risk,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne. “As Trump himself has signaled, it’s time for markets to refocus on the key themes: economics, inflation, tariffs, and the passing of the ‘One Big, Beautiful Bill.”
Trump, who made the truce announcement days after ordering airstrikes on Iran’s nuclear facilities, said the accord had been agreed upon by both countries.
There was no immediate comment from Iran or Israel. The US leader had earlier raised hopes of de-escalating the Middle East conflict, saying the Iranian attack was “very weak” and telegraphed by Tehran.
Iran fired missiles at a US air base in Qatar earlier Monday after promising it would respond “proportionately and decisively” to the weekend bombing by American forces of three nuclear facilities. Qatar said the missile barrage was intercepted and the base had been evacuated in advance.
The Bloomberg Dollar Spot Index dropped 0.2%, following a similar decline on Monday. The Australian and New Zealand dollars both strengthened by about 0.3%.
“The US dollar was one of the key beneficiaries of the hostilities so it is now rolling over,” said Sean Callow, a senior analyst at InTouch Capital Markets in Sydney. “Investors have been very keen to draw a line under the Israel-Iran conflict, choosing to leave aside any concerns over the path Iran might choose beyond the very short term.”
While the conflict in the Middle East is dominating headlines, selloffs caused by geopolitical events tend to be brief, according to Morgan Stanley strategists.
“History suggests most geopolitically-led selloffs are short-lived/modest,” strategists led by Michael Wilson wrote in a note on Monday. “Oil prices will determine whether volatility persists.”
According to the Morgan Stanley team, prior geopolitical risk events have led to some volatility for equities in the short term, but one, three and 12 months after the events, the S&P 500 has been up 2%, 3%, and 9%, on average, respectively.
Meanwhile, bond investors watching the latest geopolitical developments are on alert for hints on when the Federal Reserve will deliver the two 2025 interest-rate cuts officials projected at their latest policy meeting.
Fed Chair Jerome Powell will have two chances this week to explain to lawmakers why he and most of his fellow policymakers seem resolved to continue holding interest rates steady at least until September, ignoring Trump’s persistent calls to lower borrowing costs.
He will testify before the House Financial Services Committee on Tuesday, and again on Wednesday before the Senate Banking Committee.
In Asia, geopolitical concerns remained dominant. China moved to tighten controls over two chemicals that can be used to make fentanyl, in an apparent olive branch to the US that may help maintain their fragile trade truce. Still, Beijing criticized the strike on Iranian nuclear facilities and reiterated its willingness to join international efforts to restore peace in the Middle East.
The Middle East accounts for about a third of global crude production, and there haven’t yet been any signs of disruption to physical oil flows, including for cargoes going through the Strait of Hormuz. Since Israel’s attacks began earlier this month, there have been signs that Iranian oil shipments out of the Gulf have risen rather than declined.
