MCX crude oil may hit Rs 12,000 amid West Asia tension, weak rupee

MCX crude oil futures could rally towards Rs 11,500-Rs 12,000 amid geopolitical tensions in West Asia, says expert Ajay Kedia. The surge is linked to Brent crude near $100, a weak rupee, and supply disruptions in the Strait of Hormuz.

MCX crude oil futures could move toward Rs 11,500-Rs 12,000 levels in the coming weeks if global crude prices remain elevated amid rising geopolitical tensions in West Asia, Ajay Suresh Kedia, Director of Kedia Advisory, told ANI on Friday.

"We are seeing strong upward pressure on MCX crude oil prices due to the ongoing geopolitical risk premium and currency movement. If Brent crude sustains near $100 per barrel and the rupee weakens toward ₹94 per dollar, MCX crude oil contracts could approach the ₹11,500-₹12,000 zone," Kedia told ANI in an online interview, highlighting the transmission from international benchmarks to domestic commodity markets.

Global Benchmarks and Geopolitical Risks Drive Prices

Crude oil futures on the Multi-Commodity Exchange (MCX) closely track global crude benchmarks, particularly Brent and NYMEX WTI, which have surged amid disruptions in the Strait of Hormuz -- a strategic shipping route responsible for nearly 20% of global oil and LNG trade. Escalating tensions involving the US, Israel, and Iran have significantly disrupted tanker movement through the region, pushing Brent crude above $100 per barrel this week, marking its highest levels in nearly four years.

MCX crude oil contracts are priced in Indian rupees per barrel, meaning movements in global crude prices combined with currency fluctuations directly influence domestic futures pricing. A weaker rupee, which recently touched record lows amid equity market outflows and heightened geopolitical uncertainty, increases the rupee cost of crude imports and supports higher MCX crude prices. India imports nearly 90% of its crude oil requirements, with a large share sourced from the Middle East, making the domestic market particularly sensitive to developments in the Strait of Hormuz.

Kedia noted that while alternative supplies from Russia, the United States, and Norway are helping mitigate immediate supply disruptions, the global crude pricing mechanism ensures that Indian futures markets respond rapidly to international price movements. "The spillover impact is already visible across domestic energy derivatives. If global crude benchmarks remain elevated and freight risk premiums persist, MCX crude oil prices could move closer to the ₹12,000 level on a conservative basis in the near term," he added.

Wider Market Impact and Inflationary Pressures

Recent price movements are consistent with broader global energy volatility. Major international banks, including Goldman Sachs, have revised their crude oil forecast ranges upward, citing persistent supply disruptions and elevated geopolitical risk premiums. At the same time, the International Energy Agency (IEA) has coordinated a significant release of strategic petroleum reserves, highlighting the scale of supply disruptions currently affecting global energy markets.

Higher crude prices are also being closely monitored for their inflationary implications. India's retail inflation rose to 3.21% year-on-year in February, with energy costs contributing to upward pressure on consumer prices.

Future Outlook and Key Factors to Watch

Despite the current rally, Kedia expects volatility to remain elevated before prices eventually stabilise. "In the medium term, once markets see reduced disruption in Strait of Hormuz shipping flows and freight costs begin to normalise, crude oil prices could stabilise from elevated levels," he said.

Market analysts say that the combination of geopolitical tensions, currency movements, and global crude price trajectories could keep MCX crude oil prices trading within a wide and volatile band in the near term. "We have to continuously monitor diplomatic developments and any signs of de-escalation in West Asia, as these will provide critical cues for the future direction of crude oil supply-demand dynamics and prices," Kedia added. (ANI)

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