US-Iran peace deal: Brent crude prices edged higher on Friday but remained on track for a weekly decline of nearly 8%, as a ceasefire agreement between Israel and Hezbollah eased some geopolitical concerns. However, gains were capped after Iran outlined conditions for the use of the strategically important Strait of Hormuz.

Brent crude futures had risen 66 cents, or 0.53%, to $80.38 per barrel, while US West Texas Intermediate (WTI) crude advanced 94 cents, or 1.23%, to $77.54 a barrel, on Friday.

Crude oil prices have witnessed a steep correction, plunging nearly 40% from the peak of about $120 per barrel reached after tensions in West Asia escalated. The decline follows an interim agreement between the United States and Iran, which is expected to reopen the Strait of Hormuz, relax sanctions on Tehran, and pave the way for increased Iranian oil exports to global markets.

As a result, oil prices have fallen to their lowest levels since the initial phase of the US-Israel-Iran conflict, with investors factoring in reduced geopolitical risks and a stronger outlook for global crude supply.

Impact of falling crude oil prices on OMCs

According to Swarnendu Bhushan, Co-Head of Research, Research Associate, Institutional Research – PL Capital, brent dropping below $80 per barrel has provided a positive respite for oil marketing companies (OMCs). However, Q1FY27 is expected to weigh sharply on profitability, impacting earnings for the full year.

“The overhang of a rollback in excise duty cuts of Rs10/ltr remains a key pressure point for OMCs, although the rollback is expected to happen in a phased manner,” Bhushan said.

He further added that the government continues to bear a significant revenue impact of ₹1700 billion per year from the excise cut. Overall, while near-term sentiment has improved, Q1FY27 losses and continued uncertainty around the excise duty rollback suggest that OMC profitability is likely to remain under pressure through FY27.

Impact of falling crude oil on petrol and diesel prices

Sugandha Sachdeva, founder of SS WealthStreet, believes that these developments are positive for crude oil prices globally, a reduction in retail petrol and diesel prices in India may not happen immediately.

Sachdeva highlighted that in May 2026, domestic fuel prices were raised sharply following the surge in international crude oil prices. Retail petrol prices in Delhi currently stand at ₹102.12 per litre, while diesel prices are at ₹95.20 per litre, compared to the pre-conflict FY26 benchmark levels of ₹94.80 per litre and ₹87.70 per litre, respectively.

She further explained that the key reason why fuel prices may not be reduced despite the fall in crude oil is that OMCs have absorbed significant under-recoveries during the period of elevated crude prices.

“As of June 15, 2026, under-recoveries on petrol had declined to around Rs.3 per litre from nearly the peak under-recovery of ₹15–30 per litre on petrol and diesel as Brent crude had eased towards $82 per barrel and is now sub $80 per barrel.

OMCs had refrained from fully passing on the earlier spike in crude oil prices to consumers for an extended period, resulting in pressure on marketing margins. The recent fuel price hikes were aimed at partly restoring profitability and offsetting those losses,” Sachdeva said.

On the near-term outlook, she said that a sustained decline in crude oil prices and stability in India’s crude basket will be critical before any meaningful reduction in retail petrol and diesel prices is considered. OMCs are likely to first focus on rebuilding marketing margins and recovering past under-recoveries before passing on the benefit of lower crude prices to consumers.

On the other hand, V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, also said that even though crude prices have fallen steeply after the peace deal between US and Iran, the government is unlikely to reduce the petrol and diesel prices in India immediately.

“Prices were raised only by around 10% compared to around 50% increase in the price of crude. And this was done in four stages from May 15th to May 25th. Since the government absorbed a significant part of the price hike thereby incurring a higher fiscal deficit than budgeted, the government is likely to take the benefit of the crude price fall for some time and then pass on the benefit to the consumer,” Vijayakumar said.

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