Shares of ONGC and Oil India rose up to 2 per cent on Wednesday after crude prices extended gains for a second session as Iran and Israel intensified attacks in the Middle East, damaging tankers and disrupting shipments from the key oil-producing region.
A rise in crude prices is positive for upstream oil and gas producers such as ONGC and Oil India. Higher prices directly increase revenue per barrel, potentially lifting profit margins and supporting higher capital expenditure on exploration.
On Wednesday, oil prices advanced by more than $1. Brent crude gained $1.11, or 1.4 per cent, to $82.53 a barrel after closing at its highest level since January 2025 in the previous session. U.S. West Texas Intermediate rose 79 cents, or 1.1 per cent, to $75.37, following its strongest settlement since June.
Israeli and U.S. forces carried out strikes across Iran on Tuesday, triggering retaliatory attacks by Iran on energy infrastructure in a region that accounts for just under one-third of global oil production. Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC), has reduced output by nearly 1.5 million barrels per day — roughly half its production — due to storage constraints and the absence of an export route, Reuters reported. Iraq may be forced to shut in nearly 3 million barrels per day of output within days if exports do not resume.
Iran has also targeted tankers in the Strait of Hormuz, a key passage through which about one-fifth of the world’s oil and liquefied natural gas supplies move. Shipping traffic has remained effectively halted for a fourth consecutive day after Iran attacked five vessels.
Where are prices headed?
Domestic brokerage JM Financial said scenario analysis suggests limited retaliation could lift prices by $5–10 per barrel; direct damage to Iranian oil infrastructure may add $10–12 per barrel; and disruption in the Strait of Hormuz could push crude above $90 per barrel. A broader regional war could drive prices beyond $100 per barrel.
Nearly 20 per cent of global oil flows pass through the Strait of Hormuz, while over 40 per cent of India’s crude imports transit this route, underscoring significant exposure. JM Financial added that every $1 increase in crude prices raises India’s annual import bill by roughly $2 billion.
Prolonged tensions could elevate logistics and marine insurance costs, disrupt Gulf shipping routes, and widen pressure on the trade balance. The rupee faces a near-term depreciation bias, with potential RBI intervention via foreign exchange reserves.
The transmission mechanism is clear: higher crude prices increase inflation risks; elevated inflation pushes bond yields higher; and rising yields compress equity valuation multiples. If tensions escalate to the point of threatening the Strait of Hormuz, the risk premium could become structural rather than proportional. Even the possibility of partial disruption in this critical chokepoint could add a $20–$40 per barrel geopolitical premium, potentially pushing crude towards the $95–$110+ range — well beyond the direct mechanical impact of Iran’s supply loss alone, Equirus Securities said in a report.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
