Global crude falls after US-Iran deal, but Indian fuel prices remain high due to lingering under-recoveries and inventory lags

A US-Iran peace deal announced in mid-June 2026 has driven global crude prices down sharply, with Brent crude falling to under US $80 per barrel from above US $100 during the conflict. However, Indian consumers have yet to see relief at the pump, as state-run oil marketing companies (OMCs) continue grappling with heavy under-recoveries and structural delays.

Petrol in Delhi crossed Rs 102 per litre in May 2026, and diesel reached Rs 95.20 after OMCs—HPCL, BPCL, and Indian Oil—implemented cumulative hikes of Rs 7.38 per litre on petrol and Rs 7.52 on diesel between May 15 and May 26. A domestic LPG cylinder also saw a Rs 29 increase on June 7, the second such hike since the West Asia conflict began. These increases were driven by the need to offset massive under-recoveries that had built up after weeks of absorbing higher global crude costs.

At the peak of the conflict, under-recoveries across petrol, diesel, and LPG reached approximately Rs 30,000 crore per month. This figure represents the cash outflow the OMCs had to absorb rather than a profit gap. As of June 15, under-recovery on petrol has fallen to Rs 3 per litre from Rs 6 per litre a week earlier, while diesel under-recovery dipped to Rs 27 per litre from Rs 30. Despite these improvements, OMCs are still losing money on every litre sold, making an immediate price cut unlikely.

Structural factors also delay consumer relief. Oil companies purchase crude under forward contracts and spot deals, so the fuel sold at pumps today was bought at older, higher prices. The actual savings from lower crude prices typically take three to six months to flow through inventory cycles. Additionally, production infrastructure in key Middle Eastern nations such as the UAE, Kuwait, Oman, and Saudi Arabia suffered disruptions during the conflict. Even with peace, supply normalisation is gradual, meaning actual import prices may not yet reflect headline Brent movements.

OMCs are expected to prioritise balance sheet recovery before passing any savings to consumers. Any reduction in pump prices is more likely in the second half of 2026, contingent on crude stabilising below US $80 per barrel and the rupee-dollar exchange rate remaining steady. If either factor reverses, the timeline for consumer relief will extend further.