Oil stocks surge as crude prices spike amid rising Middle-East tensions

Oil prices today: Shares of Oil companies rallied over 3 per cent on Thursday as crude oil prices soared due to escalation of ongoing tensions in the Middle East region. 

Shares of ONGC rose 1.9 per cent, GAIL surged 1.7 per cent, and Petronet LNG was up 3.2 per cent in Thursday’s intraday trade. 

That apart, upstream oil companies slumped as a hike in oil prices is set to increase thier costs. These included RIL down 2.03 per cent, HPCL slipping by 5.2 per cent and BPCL shedding 4.5 per cent intraday. 

On the other hand, oil related stocks of sectors such as Aviation, Paint and Tyres were also reeling under pressure due to rising oil prices.

Aviation major Indigo fell 2.3 per cent, while SpiceJet slipped 2.8 per cent intraday. Paint stocks like Berger Paints, Asian Paints and Indigo Paints also tanked 6.1 per cent, 4.4 per cent and 6 per cent, respectively. 

In tyre stocks, Apollo Tyres slumped 4.1 per cent, CEAT decreased 3.1 per cent and MRF declined by 1.6 per cent.

Most oil stocks and related sector stocks came under the hammer after crude oil prices (Brent) surged nearly 4.2 per cent to $74.75 in the last three days from a level of around $71.67 on 30 September, 2024.

According to analysts, the real challenge for the industry will come in the form of logistics management, as trade disruptions can significantly impact the supply of global commodities.

"Increased costs and uncertainties regarding delivery timing are where the market is reacting, not merely on the fluctuations in crude oil prices," said Deven Choksey, managing director at DRChoksey FinServ. 

Chokey further said that global oil prices have adapted to handle war-related situations as the world is less dependent on Iran's crude oil and more on increased production from the US and Saudi Arabia.

As most oil related stocks have corrected today, Choksey added that while it's important to be cautious, the drop in stock prices may present buying opportunities, especially if valuations are attractive.

India presently sources around 87.7 per cent of its oil from global imports. The country imported 232.5 million metric tonnes (MMT) of crude oil in the 2023-2024 financial year, and increased its dependency on oil imports to 87.7 per cent in financial year 2023-2024 (FY24), up from 87.4 per cent in (FY23). 

In May 2024, Russia was India's top oil supplier, providing 41 per cent of crude imports. Iraq accounted for 20 per cent, while Saudi Arabia's share was 11 per cent.

Why is crude oil on boil?

The crude oil prices are on the boil as tensions grew heavier between Israel and Lebanon. In the latest, Israel bombed central Beirut on Thursday morning, killing at least six people, after its forces suffered their deadliest day on the Lebanese front in a year of clashes against Iran-backed armed group Hezbollah, according to a report by Reuters.

Earlier, reports indicated that the Israeli military has confirmed the deaths of eight soldiers, including a team commander, during ground operations in southern Lebanon. This escalation follows missile attacks from Iran targeting Tel Aviv, with Israel's military chief warning of an imminent response to Iran.

Iran launched a significant missile barrage at Israel on Tuesday night, marking its largest-ever attack on the country. The strikes targeted military bases but were largely intercepted by Israel's aerial defences, supported by allies such as the US and the UK.

World powers had been warning for months about a potential “regional escalation” stemming from Israel's war on Gaza, which has resulted in the deaths of approximately 40,000 Palestinians. 

This escalation followed a Hamas attack on October 7, 2023, that killed about 1,200 Israelis. Israel is currently facing allegations of genocide at the International Court of Justice.

At 10:22 AM; ONGC was up 0.86 per cent, Petronet LNG surged 2.75 per cent, Hindustan Oil Exploration increased by 0.56 per cent and GAIL advanced by 0.48 per cent.