ONGC, Oil India surge Over 3%; IOCL, BPCL Drop As Crude Rises Almost 10%

Indian oil and gas stocks went in opposite directions on Friday after crude oil prices jumped by a dramatic 10%. What caused the spike? A major geopolitical jolt, Israel launched preemptive airstrikes on Iran’s nuclear and military sites. The market’s reaction was swift: upstream companies like ONGC and Oil India saw their shares climb, while downstream players like IOCL and BPCL took a hit, mainly due to fears that higher crude costs would squeeze their refining margins.

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Crude prices jump on Middle East tensions

Oil prices didn’t just rise, they surged. After Israel’s strikes on Iran’s key facilities, global oil benchmarks like WTI and Brent saw their biggest single-day gains since mid-2022. WTI futures for July soared nearly 11.7% to $75.99 a barrel, while Brent for August rose around 11.3% to $77.21. Some outlets even noted Brent crossing the $75 mark for the first time in years. The core fear? That tensions could disrupt oil movement through the Strait of Hormuz, a key route handling about one-third of the world’s seaborne oil.

Market shake-up: winners and losers

ONGC share price spiked more than 3%, hitting ₹255.40. Why? Rising oil prices could boost its revenues and profit margins. Oil India wasn’t far behind, gaining about 2.5% and trading around ₹479.75.

But refiners felt the heat. IOCL share price dropped as much as 6%, ending near ₹139. BPCL slid between 3.8% and 6%, settling around ₹306.55. HPCL also dipped 3.1% to ₹380.25.

Why the fall? While these companies might eventually raise fuel prices at the pump, they’re immediately stuck paying more for crude. And with the rupee weakening, that cost gets even higher.

Rupee under pressure; RBI steps in

Speaking of the rupee, it took a hit, sinking to a two-month low past ₹86.20 to the dollar. As investor nerves frayed, the RBI reportedly jumped in by selling dollars through public banks to stabilise things. That helped the rupee ease slightly to ₹86.05.

Economists are sounding alarms, too. If oil keeps climbing, India’s current-account deficit could widen (by about 0.4% of GDP for every $10 rise in oil prices), and inflation could tick up further.

Wider market fallout

It wasn’t just oil stocks. The broader market stumbled too. The BSE Sensex dropped 888 points (1.1%) to 80,803. The Nifty50 lost 1.2%, falling below 24,600. Investors rushed to safe-haven assets, such as gold, yen, and Swiss francs. U.S. markets weren’t immune either, with Dow futures sliding almost 700 points.

FIIs pulled out ₹3,831 crore from Indian equities, though domestic institutions cushioned the blow by buying ₹9,394 crore worth.

Why is crude going haywire now?

So what’s behind this oil chaos? A few key factors:

• Israel targeted Iranian nuclear and missile sites, aiming to halt weapons development.
• Iran fired back with drones, fueling fears of a wider regional war.
• The Strait of Hormuz, a vital artery for global oil, is at risk of disruption.

Experts say geopolitical risk is now baked into oil prices. With global oil supplies already tight, any new conflict could tip the balance even further.

What does this mean for India’s energy sector?

There’s a double-edged sword here:

• Good news for upstream players like ONGC and Oil India, as they benefit from higher crude prices.
• Bad news for refiners and fuel retailers like IOCL, BPCL, and HPCL, because their costs go up faster than they can raise prices.

For everyday consumers, higher oil prices could mean more inflation. And that ties the RBI’s hands on interest rates. They might need to keep stepping in to support the rupee or tighten the money supply to manage inflation.

Looking ahead

The big concern? If tensions worsen, oil prices could keep rising, especially if Iran retaliates by hitting shipping lanes or if Western powers get pulled in. Morgan Stanley even warned oil could stay elevated until late 2025, even with OPEC+ ready to pump more.

In India, two things will be key:

• If the rupee keeps falling, import costs and inflation will rise.
• Fuel price policy: Will the government let oil companies pass on the full cost, or will it absorb some of it and risk widening the fiscal deficit?

In a nutshell

Friday showed how fast global events can rock Indian markets. Oil surged 11–12% in a day, boosting upstream players like ONGC and Oil India but dragging down refiners like IOCL and BPCL. Add a weakening rupee and a nervous stock market, and the pressure on India’s economy is growing. If the Middle East situation escalates, we could be in for more oil shocks, making inflation, trade, and policy decisions even more complicated in the months ahead.