US-Iran Tensions to Exacerbate Fuel Price Volatility, Present Opportunities for Stock Market Investors
Petrol and Diesel Prices in India: A Brewing Storm Amidst the US-Iran War
The recent escalation of the US-Iran war has sent shockwaves through the global crude oil market, leading to a significant increase in international crude oil prices. However, in a surprising move, petrol and diesel prices in India have remained unchanged, with state-run oil marketing companies (OMCs) choosing not to pass on the higher costs to consumers. This decision comes despite the fact that oil marketing companies have been operating under margin pressure due to not fully passing on higher crude costs.
According to market estimates, the delay in increasing fuel prices is attributed to the upcoming state assembly polls in West Bengal and Assam. Historically, the government has avoided fuel price hikes ahead of elections due to their direct impact on consumer sentiment. As a result, the prices of regular petrol and diesel have largely remained unchanged since March 2024, with petrol priced at ₹94.77 per litre and diesel at ₹87.67 per litre in the national capital.
| State-Run OMCs | Private Refiners |
|---|---|
| Petrol Price (₹/litre) | Petrol Price (₹/litre) |
| 94.77 | 95.77 (Nayara) |
| Diesel Price (₹/litre) | Diesel Price (₹/litre) |
| 87.67 | 88.67 (Shell) |
Read also: Market Stuck in Unstable Equilibrium
However, private refiners and oil marketing companies, such as Nayara and Shell, have already raised fuel prices, with petrol priced at ₹95.77 per litre and diesel at ₹88.67 per litre. State-run OMCs have increased the prices of premium diesel and petrol, which account for 4% of total fuel sales, as well as the rate of industrial diesel, which is purchased in bulk by industries and the agriculture sector.
For market investors, the US-Iran war presents an opportunity to benefit from the disruption in global supplies of diesel and jet fuel. According to Dhaval Popat, Analyst — Energy at Choice International, pure-play refiners in India are expected to see robust year-on-year EBITDA growth due to stronger jet fuel demand and broader distillate tightness in Europe.
| Stocks to Buy | Reason |
|---|---|
| ONGC | Upstream oil producers tend to do better when oil prices rise |
| Oil India | Similar to ONGC, upstream oil producers benefit from higher oil prices |
| Reliance Industries | Refining margins are expected to increase with higher oil prices |
| Indian Oil | State-run oil marketing company expected to benefit from refining margins |
Gaurav Udani, Founder of Thincredblu Securities, advises investors to follow the sector rotation trick, where stocks linked to energy may do better than those linked to consumption. Traders can also look at short-term chances in oil-sensitive stocks based on how prices move.
Read also: Forex Reserves Increase by $2.362 Billion to $703.308 Billion
Investor Takeaway
Upstream refiners may benefit from rising oil prices.
