Nifty 50 has fallen nearly 9 per cent in 2026 amid fears that surging crude oil prices could weigh on the broader economy. Yet, an ETIG analysis of past instances of sharp oil spikes shows that equities typically recover within two months once crude prices begin to cool.
In July 2008, for instance, crude surged 27 per cent in just two months to a record $147.5 a barrel during the Global Financial Crisis, dragging Nifty down 25 per cent. Two months later, crude had eased 17 per cent, and Nifty rebounded 12 per cent.
A similar pattern emerged in October 2018. As crude rose 18 per cent over two months on strong demand and geopolitical risks, Nifty slipped more than 4 per cent. But over the next two months, the index stabilised while Brent prices collapsed nearly 39 per cent.
The trend repeated in March 2022 when Russia-Ukraine conflict pushed Brent up 58 per cent in two months and Nifty dropped 11 per cent. Within the following two months, oil prices fell 20 per cent and Nifty regained all lost ground, rising 11 per cent.
Over a 25-year period, Nifty and Brent show a moderately positive correlation of 0.3. A periodic analysis, however, reveals that this relationship has shifted meaningfully over time. The coefficient has declined to around 0.38 since 2020 from 0.87 between 2000 and 2010, indicating a weakening linkage in recent years.
Crude’s impact extends beyond equities as higher prices affect input costs thereby affecting the broader economy. The Consumer Price Index shares a strong correlation of 0.64 with Brent, underscoring the effect of energy prices on inflation.
With Brent crude up 72 per cent so far in 2026, the rise is set to increase energy and feedstock costs, potentially squeezing corporate margins and widening the fiscal deficit.
