Crude oil futures on the Multi Commodity Exchange of India (MCX) plunged sharply on Tuesday, with prices falling nearly 12% during the session as traders unwound the geopolitical risk premium built during the recent Middle East conflict.
At the time of reporting, MCX crude oil futures were trading around Rs 7,752 per barrel, down Rs 1,036 or 11.79%.
De-escalation signals pressure oil prices
The sharp decline in crude prices comes after comments from Donald Trumpwho indicated that the ongoing conflict involving Iran could end sooner than initially expected.
Trump reportedly said that military operations were progressing faster than the previously estimated four-to-five-week timeline, which markets interpreted as a sign of possible de-escalation.
Such signals significantly reduced fears of prolonged supply disruptions in the Middle Easta region responsible for a large share of global oil exports.
Supply expectations weigh on crude
Oil prices were also pressured by reports that the United States may consider easing restrictions on Russian oil flows to stabilise global energy markets.
Additional discussions around the possible release of strategic petroleum reserves have further raised expectations of increased supply in the near term.
Profit booking after sharp rally
The correction also reflects heavy profit-taking after crude prices surged dramatically in recent sessions on fears of supply disruptions linked to the regional conflict.
Prices had rallied sharply across global benchmarks and domestic contracts, making the market technically overbought. Once geopolitical fears eased, traders rushed to exit positions, accelerating the decline.
Demand concerns add pressure
Markets are also factoring in broader macroeconomic risks, including the possibility that sustained high energy prices could slow global growth and reduce fuel demand.
With geopolitical tensions appearing to cool, traders shifted focus back to demand outlook and global supply dynamics, triggering a sharp sell-off in crude futures.
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