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Shares of oil companies and aviation stocks remained under stress on Wednesday amid continued surge in crude oil prices as the Israel-Iran conflict entered its sixth day, raising concerns about potential oil supply disruptions. At 11.50 a.m., August Brent oil futures were at $76.08, while August crude oil futures on WTI (West Texas Intermediate) were at $72.68. On the Multi Commodity Exchange (MCX), July crude oil futures were trading at ₹6,301, marginally up against the previous closing price.
The heightened geopolitical tensions have impacted oil-related stocks, such as aviation, paints, and that of oil marketing companies.
Shares of airline companies— Spicejet and IndiGo parent InterGlobe Aviation —fell by up to 1% today amid concerns that a rise in crude prices would propel aviation turbine fuel (ATF) higher. ATF is a direct derivative of crude oil and constitutes a significant portion (30-40%) of an airline's operating expenses.
Shares of paint companies such as Asian Paints and Indigo Paints were marginally down, while Berger Paints , Grasim, and Kansai Nerolac were trading a tad higher. The paint industry is highly dependent on petroleum-based raw materials such as solvents, resins, phthalic anhydride, and titanium dioxide, which account for 40-60% of total raw material costs.
In the oil and gas space, state-owned oil marketing companies (OMCs) such as Hindustan Petroleum Corporation (HPCL) Bharat Petroleum Corporation (BPCL), GAIL India , Oil and Natural Gas Corporation (ONGC) , Oil India Ltd (OIL), Indraprastha Gas (IGL) , and Indian Oil Corporation (IOC) fell by up to 3% during the day's trade so far.
Among private players, Reliance Industries was marginally down by 0.3%, while Adani Total Gas shares surged by up to 1%.
Meanwhile, the BSE Oil & Gas index and Nifty Oil and Gas Index were down by up to 1%, while the domestic equity benchmarks, the Sensex and the Nifty, were trading lower by 20% each at the time of reporting.
Will oil prices stabilise soon?
Israel’s sudden attack on Iranian nuclear sites and personnel led to an immediate 12-13% spike in oil prices, with brent reaching almost $80 per barrel. Prices have hovered around $75/bbl since then, though attacks by the two countries have intensified, Emkay Global said in a report.
As per the report, an end to the war can cool off oil prices below $70/bbl; as seen in the Russia-Ukraine war, unless major oil and gas supply infrastructure is structurally affected in a few weeks. The brokerage continues to assume average brent price at $70/bbl for the year and expect prices to stabilise in a few weeks, citing that oil markets are well supplied so far in 2025, with rising OPEC+ and non-OPEC+ production and inventory build-up.
“Brent at $70/bbl is a safe spot for OMCs and upstream players’ earnings and current valuation,” the report noted. In terms of target price, OMCs are more attractive versus upstream, saying that oil moving towards $80/bbl will drive upstream earnings and valuations. On the other hand, a decline in brent price would support OMCs as brent at $70/bbl would also mean a lesser risk of retail price cuts in petrol and diesel.
“For OMCs, we see no downgrade risk up to $75/bbl in 9MFY26. LPG subsidy, if paid, can lead to upgrades,” it added.
(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)
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