Ceasefire announced, crude oil is out of stock… prices will fall to $70!
The announcement of the US-Iran ceasefire has led to a historic drop in crude oil prices. Brent crude has fallen below $92 as supply concerns have eased. Experts predict prices could soon fall to $70 per barrel.
The entire landscape in the international market has changed within the past few hours. The sudden announcement of a ceasefire between the US and Iran has sent shockwaves through global markets.
Crude oil, which was trading at record highs just a few days ago, has now suffered its biggest drop since the 1991 Gulf War.
WTI crude, which had surpassed $117 just a day earlier, has fallen nearly 15 percent to around $91. Meanwhile, Brent crude has also plunged more than 13 percent, falling below $92.
This is how the big supply crisis was resolved
This downturn is primarily due to the two-week peace agreement between the United States and Iran. Under this agreement, Donald Trump stipulated the immediate opening of the Strait of Hormuz, which Iran accepted and announced a halt to its attacks.
This waterway is a veritable lifeline of the global economy. Approximately 20 percent of the world's oil supply (20 million barrels of crude oil daily) and 25 percent of LNG flow through it.
Fifty percent of India's oil imports also depend on this route. With the opening of this route, OPEC+ has decided to increase production by 206,000 barrels per day.
Furthermore, US oil inventories have seen a significant increase of 5.5 million barrels, alleviating any concerns of supply shortages overnight.
Crude oil will come at $70
The commodity market is seeing this peace agreement as a lifeline. Renowned market expert Anuj Gupta estimates that this major improvement in the supply chain could lead to crude oil prices reaching $70 to $80 per barrel in the international market within the next few weeks.
Gupta believes that the recent market turmoil was not due to a lack of demand; it was primarily due to logistics and transportation challenges directly resulting from the war. Now, with these disruptions removed, oil and gas supplies will rapidly return to normal.
Investors' lost confidence is returning
The biggest beneficiaries of the easing of geopolitical tensions will be those industries that are directly dependent on regular transportation, packaging costs, and fuel availability. Companies that have been living in fear of uncertainty for some time now have a significant burden lifted.
From the perspective of the domestic stock market, sectors linked to the economic growth, such as banking, infrastructure, and capital goods, appear to be regaining their vitality.
It has been a major relief for the Indian market that, despite heavy selling by foreign investors, domestic investors have held their ground and supported the market. India's macroeconomic outlook remains overall stable.
As global war risks diminish and cash flows improve, the economy will gain a stronger footing, which will have a positive impact on public purchasing power and consumption in the future.