Crude oil prices are heading into another volatile week, with escalating geopolitical tensions in West Asia keeping supply fears alive and the US Federal Reserve's monetary policy decision expected to dictate market direction, analysts said.
With Brent crude already crossing $117 per barrel, investors will track developments around the Strait of Hormuz, threats to energy infrastructure, and weekly US inventory data for cues on the next move.
The American Petroleum Institute and the US Energy Information Administration will release their weekly stock estimates, while Cushing crude inventories and the Federal Open Market Committee's October 27-28 meeting will be in focus, they added.
"The near-term bias remains bullish but highly headline-driven; traders should avoid chasing sharp rallies and monitor geopolitical developments, Fed guidance and weekly inventory data for directional confirmation," said Ajit Mishra, SVP - Research at Religare Broking.
Any disruption to energy infrastructure or shipping through the Strait of Hormuz could drive crude towards $120 per barrel in global markets, while credible progress towards de-escalation could trigger a sharp correction, he added.
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On the Multi Commodity Exchange, crude oil futures for November delivery climbed Rs 406, or 4.32 per cent, during the holiday-shortened week, to close at Rs 9,800 per barrel.
The gains in domestic markets came as escalating US-Iran tensions, fears of renewed military action, Houthi attacks on Saudi infrastructure and threats to critical shipping routes sustained the geopolitical risk premium, Mishra said.
For India, a prolonged spell of elevated crude prices could mean mounting pressure on the rupee, inflation, the current account and corporate margins, he added.
In overseas trade, Brent oil futures for the December delivery climbed $7.52, or nearly 7 per cent, over the past week to settle at $117.38 per barrel on the Intercontinental Exchange.
West Texas Intermediate (WTI) futures for the same month contract advanced $4.25, or 4.3 per cent, to settle at $103.27 per barrel on the New York Mercantile Exchange.
"The rally gathered pace as attention returned to escalating attacks around the Hormuz and Saudi Arabia, reviving concerns over energy infrastructure and export security," said Navneet Damani, Head of Research - Commodities at Motilal Oswal Financial Services Ltd.
Adding to the unease were reports that the US and Israel had drawn up plans to target Iranian energy infrastructure, including nuclear facilities near Natanz after the US mid-term elections on November 3.
Later, Iran warned of repercussions if Washington and Tel Aviv launch an attack, adding to market anxiety.
Supply-side interventions have offered little relief. The International Energy Agency's readiness for further strategic stock releases, the G7's additional 100 million barrels (largely an acceleration of an existing release programme), and the first Russian diesel cargo bound for the US have failed to reverse the rally.
The market is increasingly focused on whether these developments can deliver meaningful additional supply, rather than on announcements alone, Damani said.
"Although crude flows through Hormuz have shown some recovery, elevated freight costs, constrained regional shipments and persistent security threats continue to undermine export reliability.
"With physical supply yet to normalise, the risk premium remains elevated, and the balance of risks continues to favour the upside, though credible progress towards de-escalation could still trigger sharp profit-taking," Damani added.
The Fed's meeting will provide another test for oil prices, as investors assess how policymakers view inflation amid rising energy costs.
"A hawkish tone could strengthen the dollar and weigh on demand-sensitive commodities, although supply disruptions may limit crude's downside," Mishra said.
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