US-Iran deal eases oil fears, but Brent could climb back above $90 in near term: Emkay

The peace deal between the US and Iran and the expected reopening of the Strait of Hormuz have eased immediate concerns in global oil markets, pushing Brent crude prices below $85 per barrel. However, risks of supply disruptions and a rebound in demand, particularly from China, likely to push crude prices back above $90 per barrel in the coming weeks, according to a report by Emkay Global Financial Services.

The brokerage said the agreement aligned with its earlier expectations and helped avoid a sharper oil shock. It had previously estimated that Brent prices could have surged beyond $120 per barrel if an agreement to reopen the Strait of Hormuz had not been reached by the end of June, as supply buffers were rapidly shrinking.

Despite the immediate correction in prices, Emkay cautioned that the physical oil market remains tight and will determine the trajectory of crude in the near term. Supply flows through the Strait of Hormuz are unlikely to return to pre-crisis levels immediately and may take several weeks or even months to fully normalise.

According to the report, operational bottlenecks, including tanker availability, higher insurance and war-risk premiums, mine clearance and security concerns, along with the gradual restart of shut oil production facilities, could keep the market constrained. These factors may cause oil prices to trend upward again toward and potentially beyond $90 per barrel if demand strengthens quickly.

At the same time, US oil exports, which acted as a buffer during disruptions in Hormuz, are expected to decline as supplies are redirected toward domestic consumption during the peak driving season amid historically low gasoline and crude inventories.

Emkay said a sustained easing in oil prices is more likely in the second half of FY27 as supply conditions improve and non-Middle East production remains strong. It expects Brent crude to average $95 per barrel in the first half of FY27 and $85 per barrel in the second half, while maintaining its full-year FY27 Brent forecast at $90 per barrel. The brokerage expects prices to eventually fall to around $70 per barrel by the end of FY27.

China’s return to the oil market is seen as another major factor that could support prices in the short term. Chinese crude imports had dropped sharply during the crisis as the country relied on commercial inventories and curtailed refinery activity. With inventories now declining, Emkay expects China to re-enter the market as a significant buyer, adding to global demand.

The report also noted that global inventory rebuilding could support crude prices. OECD commercial stockpiles remain near multi-year lows, while the US and other countries are expected to replenish strategic reserves. Emkay expects global oil demand to exceed supply through 2026 until supply chains fully normalise.

For India, Emkay retained its FY27 macroeconomic projections, forecasting real GDP growth at 6.3%, headline inflation at 5.1% and a current account deficit equivalent to 2.3% of GDP.

The brokerage said the domestic impact of elevated oil prices would depend on how the burden is shared among the government, oil marketing companies and consumers. It also expects the government and the Reserve Bank of India’s measures to attract capital inflows to help offset pressure on the balance of payments.

Emkay estimates capital inflows of $70–75 billion could bring India’s balance of payments close to balance or even a small surplus in FY27. This, it said, could support appreciation in the rupee toward 93 against the US dollar by the end of the second quarter of FY27, although a large net short forward position may create depreciation pressures later in the fiscal year.

The report added that potential inclusion of Indian sovereign bonds in global bond indices could generate additional passive foreign debt inflows of $20–25 billion, though those gains are expected to materialise only in FY28.