Global oil prices fell on Thursday after major forecasters cut demand projections, but the deadlock in US–Iran negotiations and continuing danger to shipping routes mean India’s fuel and inflation risks remain high.

Brent crude futures dropped about 1.5% to $87.69 a barrel in early trade, while US West Texas Intermediate fell to $81.97. The decline offered some relief after months of volatility linked to the US–Israeli war with Iran.

The fall was driven mainly by expectations of weaker consumption. The Organisation of the Petroleum Exporting Countries reduced its forecast for global oil-demand growth in 2026 to 580,000 barrels a day. The International Energy Agency projected that consumption could contract by 1.6 million barrels a day as high prices and restricted supplies curb demand.

US crude inventories also rose unexpectedly by 17.4 million barrels in the week ending August 7, their biggest weekly increase since January 2023. A large inventory build usually puts downward pressure on prices because it signals that supply is exceeding immediate demand.

However, the geopolitical risk has not disappeared. A senior Iranian source told Reuters there had been no progress in talks to revive the interim agreement reached in June or establish a timetable for implementing it.

Recent attacks on shipping in the Strait of Hormuz and Bab el-Mandeb Strait have further increased uncertainty. These waterways are central to the movement of Middle Eastern oil and gas. Vessels have reportedly switched off tracking signals in some areas, reducing transparency and making it harder for markets to estimate actual supply flows.

For India, a one-day fall in crude prices does not automatically mean cheaper petrol or diesel. Domestic fuel prices depend on the rupee-dollar exchange rate, taxes, refining costs, freight and the pricing decisions of oil-marketing companies.

Crude oil is only the starting cost in the retail-fuel chain. Even if international prices decline, companies may first recover earlier losses or wait to see whether the fall is sustained. Conversely, a sudden price spike may not be passed on immediately if the government or fuel retailers choose to cushion consumers.

India imports most of the crude oil it consumes. A prolonged period of high prices raises the country’s import bill, puts pressure on the rupee and increases transportation and production costs. Those pressures can eventually reach consumers through costlier fuel, air travel, packaged goods and food distribution.

Higher crude prices can also affect cooking gas, fertiliser production and the finances of industries that use petroleum-based inputs. The impact is therefore broader than the price displayed at a petrol pump, and it can take several weeks to become visible in inflation data.

The latest Indian inflation data already show transport costs rising, while global crude remained substantially above pre-war levels in July. This is why the US–Iran negotiations matter directly to Indian households, not only to energy traders.

There are now two opposing forces in the market. Weaker demand forecasts and high inventories are pulling prices down. Conflict-related supply constraints and the risk of fresh shipping attacks are preventing a steeper fall.

If the US and Iran revive an agreement and shipping becomes safer, oil prices could ease further. If talks collapse and attacks disrupt exports, the market could reverse quickly. For Indian consumers, the sensible conclusion is that Thursday’s decline is welcome but does not yet amount to a durable end to the fuel-price threat.