Crude oil prices fell sharply on Monday, May 25, with MCX crude futures dropping 5.08% to ₹8,702 per barrel in early trade, as global markets reacted to US President Donald Trump’s weekend statement that a deal with Iran had been “largely negotiated” and details would be announced soon. Brent crude fell 4.8% to $98.52 per barrel, breaking below $100 for the first time this month, while US-traded WTI crude dropped 5% to $91.76.
What Trump said over the weekend
Trump told reporters on Saturday that an agreement with Tehran was largely in place and would be announced shortly, including provisions for the reopening of the Strait of Hormuz, the narrow waterway through which approximately one fifth of the world’s oil and LNG normally passes. The strait has been effectively closed since the Iran war began on February 28. On Sunday, Trump dialled back the urgency, urging his negotiating team not to rush, a statement that tempered some of the optimism but did not reverse the broader market direction.
Asian markets respond
The impact extended well beyond oil markets. Japan’s Nikkei 225 crossed 65,000 for the first time ever, gaining 2.9% on hopes that the Hormuz reopening would ease the severe energy supply disruption that has hit Japan and South Korea particularly hard given their near-total dependence on Gulf energy imports. UK and US markets are closed on Monday for public holidays, meaning the full extent of the price move will face its next test when Western exchanges open on Tuesday.
What analysts are saying
Chris Weston at Pepperstone noted that if Brent pushes toward $90, risk assets could see renewed life as short-term inflation expectations ease and implied rate hike bets for 2027 are gently pared back. He flagged that dollar positioning has become quite stretched, and falling inflation expectations driven by lower energy prices could trigger unwinding of long USD positions that have accumulated through the conflict period. The DXY dollar index was already down 0.2% at 98.98 in early Monday trade.
The week ahead carries a critical data test. US core PCE, the Federal Reserve’s preferred inflation gauge, is due for release and is expected to tick up on a year-on-year basis, with headline PCE inflation tipped at 3.8%, nearly double the Fed’s 2% target. Falling oil prices could limit the dollar’s reaction to that number, creating a complex push-pull for currency and bond markets.
The MCX picture and India context
MCX crude at ₹8,702 represents a significant move in rupee terms, with the long unwinding signal on open interest confirming that traders who had positioned for continued oil price elevation are closing positions on the peace deal news. For India, the implications of sustained oil below $100 would be substantial. Every meaningful decline in crude prices reduces the import bill, relieves the current account deficit, takes pressure off the rupee, reduces the urgency of further fuel price hikes, and gives the RBI more room to hold rates rather than hike at the June 3 to 5 MPC meeting.
India raised petrol prices for the fourth time in 12 days just this morning, pushing Delhi petrol above ₹102 per litre. The irony of the fourth hike arriving on the same morning as the sharpest crude price decline of the year is not lost on consumers or policymakers. Whether the peace deal is confirmed quickly enough and crude prices fall sustainably enough to reverse or pause the domestic hike cycle will be the most watched policy question in India through this week.
This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making any investment decisions.