Oil prices steadied on Wednesday after a sharp drop in the previous session, as investors closely monitored geopolitical tensions surrounding the Ukraine war and the fallout from new U.S. tariffs on India, the world’s third-largest crude consumer.
At the time of writing, Brent crude futures slipped 9 cents to $67.13 per barrel, while West Texas Intermediate (WTI) crude futures were down 8 cents at $63.17.
Both benchmarks had fallen more than 2% on Tuesday, pulling back from two-week highs reached at the start of the week.
According to industry sources, the strikes have cut into refinery capacity, meaning crude that cannot be processed domestically must instead be shipped abroad, adding to supply flows at a time when the market is already on edge.
Vandana Hari, founder of oil market consultancy Vanda Insights, observed that investors remain uncertain about how the Ukraine conflict will evolve.
“There is a lot of uncertainty over how the Ukraine stalemate might be resolved, which portends volatility for crude but likely in a relatively small range.
“Over the past week or so, much of the Ukraine peace discount has been reversed, but the market is also not ready to price in a major supply risk premium.”
Vandana Hari, founder of oil market consultancy Vanda Insights
Market analysts say crude remains caught between opposing forces: the potential disruption of Russian supply due to Ukraine’s escalating drone attacks and the demand uncertainty stemming from trade frictions between Washington and New Delhi.
The ongoing war in Ukraine continues to inject volatility into energy markets. Ukrainian drone strikes on Russian refineries have forced Moscow to ramp up crude exports, with Russia revising up its August export plans from western ports by 200,000 barrels per day following the latest attacks.
Meanwhile, U.S. Special Envoy Steve Witkoff revealed on Tuesday that he is set to meet with Ukrainian representatives in New York this week, while Washington also remains in talks with Moscow in pursuit of a peaceful settlement.
U.S. Tariffs on India Shake Market Confidence
Adding to the oil market’s nervousness are fresh U.S. tariffs on India, which came into force on Wednesday. President Donald Trump has doubled tariffs on Indian goods to as much as 50%, citing New Delhi’s continued purchases of Russian crude despite Western sanctions.
Trump repeatedly criticised India’s growing reliance on discounted Russian oil, saying it undermines efforts to isolate Moscow economically.
Initially, Indian refiners scaled back Russian imports after Washington’s tariff threats and tougher European Union sanctions on Nayara Energy, a major Indian refiner backed by Russian entities.
However, state-owned giants Indian Oil and Bharat Petroleum have since resumed purchases for September and October cargoes.
Indian Oil, the country’s largest refiner, has made clear it will continue to buy Russian crude “depending on the economics,” highlighting the complexity of balancing geopolitical risks with energy affordability.
Mixed Views on Tariff Effectiveness
While Washington hopes its tariffs will pressure India to scale back imports from Russia, analysts are sceptical about the long-term impact.
Warren Patterson, head of commodity strategy at ING, noted that Indian refiners have strong incentives to keep buying Russian oil.
“The secondary tariff has not been enough to stop India from buying Russian oil.
“The market will be watching Russian oil flows to India closely going forward to gauge the impact, if any, of secondary tariffs.”
Warren Patterson, head of commodity strategy at ING
Analysts estimate that India has saved at least $17 billion since early 2022 by increasing imports of discounted Russian crude.
But New Delhi-based think tank Global Trade Research Initiative (GTRI) warns that the new tariffs could cut India’s exports to the U.S. by more than 40%, equivalent to nearly $37 billion in the current fiscal year.
The combination of geopolitical strife in Eastern Europe and escalating trade disputes in Asia is creating a highly uncertain outlook for oil markets.
While increased Russian exports may add supply in the near term, risks of further escalation in Ukraine and retaliatory trade measures loom large.
For now, traders are adopting a cautious stance, with Brent and WTI moving only slightly despite significant headline risks. Analysts say the market may remain range-bound until there is more clarity on both the trajectory of the Ukraine war and the economic fallout from U.S.-India trade tensions.
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