Crude oil prices will likely moderate to around USD 70 per barrel in 2027 as prospects of de-escalation in the US-Iran conflict, increasing crude exports from the Middle East, and improving external conditions ease pressure on global oil markets, according to a comprehensive report by the State Bank of India (SBI).
Furthermore, the report notes that Brent crude prices will likely ease over the subsequent ten days, while the average price will hover around USD 87 per barrel based on its LTSM forecast. Observers point out several stabilizing factors shaping this global trajectory.
“Possibility of peace deal, more predictable US after mid-term elections, increasing crude exports from Middle East despite shortage in diesel will help prices stay on the lower side and could touch February 2026 levels of around USD 70 in 2027,” the report highlights.
Macroeconomic Factors and RBI Policy Outlook
The anticipated improvement in the external environment forms a core pillar of SBI’s assessment regarding the Reserve Bank of India’s (RBI) upcoming monetary policy decisions.
India’s Consumer Price Index (CPI) inflation crossed the 6 per cent threshold for the first time in the new series, printing at 6.09 per cent in October 2026 and breaching the central bank’s upper tolerance band. Although SBI expects inflation to remain above 6 per cent for the following month before decelerating, it believes that stabilizing external conditions, exchange-rate resilience, and recovering capital flows minimize the need for aggressive monetary tightening.
Consequently, analysts predict a measured monetary path moving forward.
“We believe that the balance of probabilities has decisively shifted towards a 25-bps rate hike in December, rather than a larger 50-bps adjustment,” the report states.
Key Macroeconomic Projections
Driving Forces Behind the Assessment
SBI outlines four primary factors influencing its policy and macroeconomic projections. First, central bank efforts to manage rupee volatility yield positive results, ensuring robust exchange-rate stability. Second, foreign investor inflows have touched approximately USD 7.65 billion since November 6. Third, diminishing geopolitical friction regarding the US-Iran conflict creates a favorable supply backdrop. Fourth, softer US Treasury yields alleviate global financial pressures.
Moreover, the bank projects the terminal repo rate to settle near 6.0 per cent, with a downside risk to 5.75 per cent, suggesting that an additional rate hike in February remains unadvisable given its proximity to the Union Budget. On the domestic food inflation front, SBI adds that apprehensions surrounding El Niño are likely overstated, whereas any potential impact will remain localized to select pockets such as oilseeds, sugarcane, and pulses.
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