Oil near $110 as Iran war tensions drive five-day rally

Brent crude oil extended a five-day rally to near $110 per barrel as ceasefire negotiations between the US and Iran remain uncertain. The climb from $80-85 levels seen four weeks ago reflects investor anxiety over Strait of Hormuz transit risks. Trump's diplomacy extension bought time, but permanent resolution remains elusive, leaving energy traders pricing in sustained geopolitical premium.

India's economy is acutely vulnerable to crude price surges. The country imports 75-85% of its petroleum requirements, making it one of Asia's largest energy importers. At $110 per barrel, refined product costs rise sharply, pressuring inflation metrics that the Reserve Bank of India targets at 4%. Diesel prices, critical for agriculture and transportation, pass through to food inflation and wage pressures across the economy.

Power generation, which relies partially on crude-derived fuel oil and natural gas, faces rising input costs that utilities pass to consumers through tariff increases. Petrochemical manufacturers, airlines, and plastics producers face margin compression. The RBI acknowledged in recent policy meetings that energy cost shocks remain a material risk to inflation forecasts. If crude sustains above $110, the central bank may face pressure to hold or raise rates longer than previously signaled, potentially constraining growth.