Rising Oil Prices: Impact on the Indian Stock Market

We often think that international wars are far away. But every now and again, something very far away touches our shores, like our petrol prices or grocery prices. One example is the current conflict between the state of Israel and Iran. And what is the actual concern? Crude oil prices. This situation, fueled by Israel Iran news, is a major driver of the impact on Indian stock market today.

Oil Prices Are Rising, Here's Why It Matters to You

Brent crude has gone up 7% in five days, to over $70 per barrel. This is particularly concerning for India, which imported 89% of the crude oil it consumed in the FY25, with a total cost of $137 billion for crude oil imported, roughly 15% of the total imports bill. This means that when the world oil markets cause their price to rise, the consumer in India pays more for fuel, food and transportation. Oil prices have an invisible taxation effect on individuals and businesses. This kind of crude oil news is a critical part of daily stock market news as it creates a ripple effect in equity valuations.

The Real Cost of a $10 Oil Price Hike

When crude oil prices increase by $10, there has historically been a two-pronged impact on the real economy. First, GDP growth has typically declined by about 0.3 to 0.4%, and subsequently, inflation, as measured by the CPI, has risen by about 0.4%. The increase is also not only reflected in aggregates, but it impacts households, businesses and the broader economy in many ways.

For households : The cost of fuel and transport has risen, and the price of groceries has risen; also, the EMIs are high. There is less money left for discretionary spending, given an omnipresent stunted economic environment. For businesses: More to transport, along with an escalation in raw material costs, may well narrow the margin gap. They may be willing to pass the cost on to customers, or have to take a hit to their bottom line.

Currency Impact : Higher oil prices also mean that India is spending a greater amount of dollars on imported goods. Oil prices play a role in pressure on the rupee, which in turn drives up the import prices of goods sourced from outside the country and also increases India's current account deficit.

Sectors That May See a Cost Impact - With Real Stock Examples

This is especially relevant during periods of Israel Iran war tension, where markets get highly sensitive to oil fluctuations.

1. Airlines - Jet Fuel Burns Profits

Fuel costs are a significant cost driver. An increase in oil prices will cause jet fuel to increase, which will exert margin pressure. Airlines either take the hit on margins or pass the increase onto ticket prices, and in turn reduce demand.

Real Examples:

IndiGo (InterGlobe Aviation - NSE: INDIGO) : Spent 31.1% of revenue on fuel in FY25. When crude oil prices spiked in the early part of the Russia-Ukraine conflict (2022), IndiGo's stock fell from ₹2,400 to ₹1,600 in less than 3 months.

SpiceJet (NSE: SPICJET) : This stock has been extremely volatile during the recent oil price spikes, as rising fuel cost combines with cash flow issues to make the stock reaction completely unpredictable.

Air India (Tata Group) : Because Air India is not a separately listed company, Tata Sons must manage the fuel cost pressures as it tries to have a stake in aviation.

What to watch out for If Brent crosses $85, history tells us airline stocks will typically experience a 10-15% correction as investors price in margin compression.

2. Logistics & FMCG – Transport Costs Hit Hard

Transportation of goods is more expensive when fuel prices rise. Delivery companies get impacted by increased diesel costs, and consumer brands and e-commerce companies equate this to a greater transport cost.

Real Examples:

Hindustan Unilever (NSE: HINDUNILVR):
Transport costs are approximately 8–10% of revenue. When oil prices soared in 2022, HUL passed on a 5–8% increase in price for soaps and shampoos.

ITC (NSE: ITC):
Distribution of cigarettes across India became more expensive, and while they were impacted as well, they passed it on better due to the inelasticity of demand.

Dabur India (NSE: DABUR):
Higher transportation costs were now impacting their margins as they have a rural distribution network, with lower grievability of costs in low-ticket items.

Blue Dart Express (NSE: BLUEDART):
Diesel is one of the largest cost items in their operation, so the impact was more direct.

VRL Logistics (NSE: VRLLOG):
Their diesel price increase affects them in a way that other public companies will be affected as well, because they are a transport company.

This is a typical stock market impact scenario linked to global crude oil news.

3. Paint Companies – Crude Oil Derivatives Get Expensive

Paint manufacturers have binders, solvents, and additives which come from crude oil. When the price of oil increases, their input costs increase too.

Real-life Examples:

Asian Paints (NSE: ASIANPAINT):
Titanium dioxide and solvents are raw materials linked to oil. During the 2021–22 oil rally, Asian Paints raised prices 3 times, but their margins compressed from 20% to 16%.

Berger Paints (NSE: BERGEPAINT):
Also had pressure from petrochemical inputs. Stock corrected by 25% due to the oil crisis in 2022.

Pidilite Industries (NSE: PIDILITIND):
In adhesives and sealants, they use oil-based chemicals too. They can use their market position to raise prices, but with a lag.

Kansai Nerolac (NSE: KANSAINER):
Another Tata Group paint company that is facing the same upward pressures on manufactured raw materials.

4. Auto Companies – Higher Running Costs = Lower Demand

Cars and oil are correlated. When oil prices rise, running petrol/diesel vehicles rises, and hence consumers may delay buying vehicles or choose a smaller engine size.

Some Examples:

Maruti Suzuki (NSE: MARUTI):
India’s largest carmaker. When petrol peaked above ₹100 in 2021, Maruti saw a 15–20% decline in monthly sales for six months.

Tata Motors (NSE: TATAMOTORS):
Commercial vehicles are doubly impacted – higher diesel prices for truckers result in reduced demand for new trucks.

Hero MotoCorp (NSE: HEROMOTOCO):
Demand for two-wheelers is byzantine, relatively resilient compared to petrol/diesel cars, but sustained high prices impact rural buyers and tier 2 cities.

Bajaj Auto (NSE: BAJAJ-AUTO):
Exports into fuel-sensitive territories such as Africa and Latin America are negatively impacted.

Mahindra & Mahindra (NSE: M&M):
SUV sales are expected to decline when fuel prices rise significantly.

Historical Impact: Auto stocks saw a decline of 40–60% from July 2008, when oil hit $140 a barrel, as sales declined.

Sectors That Could Do Well – The Beneficiaries

1. Oil Refiners – Margin Expansion Opportunity

When crude prices flip-flop, the spread between buying oil and selling fuel can widen. That is good for their oil refiner margins, resulting in higher profits.

Examples:

Reliance Industries (NSE: RELIANCE):
The world's largest refining complex. When crude went up in 2022, RIL's GRM (Gross Refining Margin) expanded from $8 to $18/barrel, generating a profit increase of nearly 40%.

Indian Oil Corporation (NSE: IOC):
Marketing margins benefit under the government's delayed fuel price increase conditions.

Bharat Petroleum (NSE: BPCL):
Similar to IOC, but had the benefits of marketing spreads.

Hindustan Petroleum (NSE: HINDPETRO):
Oil volatility provided refining margins improvements.

Chennai Petroleum (NSE: CHENNPETRO):
Regional refiner with a good crack spread during the oil price increase.

Such refiners often benefit during phases of rising oil prices, making them important to watch during global stock market news coverage. Key Metric: When GRM opened up above $12/barrel, refiner stocks would rally 20–30%, and sometimes much higher.

2. Defence Companies – Geopolitical Tensions = Higher Orders

Often, during periods of uncertainty, governments will increase their spending on defence, which means more orders received for defence companies.

Real Examples:

Bharat Electronics (NSE: BEL):
In 2020, during the standoff with China, BEL stock increased by 80% due to increased defence orders.

Hindustan Aeronautics (NSE: HAL):
An aircraft manufacturer that would benefit from a larger part of the defence budget.

Bharat Dynamics (NSE: BDL):
This is a company that manufactures missile systems and would likely receive an influx of orders as tensions boiled over.

BEML (NSE: BEML):
A company that makes defence and aerospace equipment.

Cochin Shipyard (NSE: CSL):
Government-owned and main vessel used for ship building, could benefit from maritime security concerns.

Mazagon Dock Shipbuilders (NSE: MDL):
Manufactures submarines and warships.

Increased geopolitical risk, such as the Israel Iran war, often leads to rising government defence budgets — a secondary but strong stock market impact.

Recent Example:
After the Russia–Ukraine conflict, India announced a 25% increase to their defence budget, and defence stocks rallied nearly 30–50%.

3. Gold & Financial Services – Safe Haven Demand

As global risk increases, lots of investors move money out of stocks into gold or bonds.

Real-life Examples:

Titan Company (NSE: TITAN):
Jewellery sales go up during uncertain times, and if gold prices are going up, then the inventory values of Titan are increasing as well.

Muthoot Finance (NSE: MUTHOOTFIN):
A gold loan company that sees price rises in gold, and the amount borrowed against gold increases.

Manappuram Finance (NSE: MANAPPURAM):
Same as Muthoot Finance, a gold loan company that sees price rises in gold and the amount borrowed against gold increases.

IIFL Finance (NSE: IIFL):
One more gold loan company that has a large portfolio of loans on gold.

PC Jeweller (NSE: PCJEWELLER):
Even though PC Jeweller is in a difficult position, jewellery companies have benefited from gold price increases.

**Pattern: When crude oil is up more than 20%, with average rates being about 10–15% in gold, the gold loan stocks in those situations seem to outperform everything by 25–40%.

Real Stock Performance During Oil Crises – Historical Data

2008 Oil Crisis (Crude: $40 to $140)

• Worst Hit: Maruti (-65%), Jet Airways (-80%), Asian Paints (-45%)
• Best Performers: Reliance (+15%), ONGC (+25%), Defence stocks (+30–50%)

2022 Russia-Ukraine Impact (Crude: $65 to $130)

• Worst Hit: IndiGo (-35%), Maruti (-20%), Paint stocks (-25%)
• Best Performers: RIL (+18%), IOC (+35%), BEL (+60%)

2019 Saudi Oil Attack (Crude: $55 to $70 in 1 day)

• Quick Impact: Aviation stocks fell 8–12% in a single session
• Recovery: Took 2–3 months as crude prices normalised

India’s Oil Dependence – A Structural Risk

1. High Import Dependency

India is the world’s number three oil user but produces around just 11% of its total crude oil today, meaning nearly 90% comes from other markets. This chronic dependency inherently makes our economy vulnerable to rapid changes in crude oil supply and prices internationally—an ongoing risk reflected in stock market news.

2. Domestic Oil Corporations:

• ONGC (NSE: ONGC): India's largest oil corporation with declining production.
• Oil India (NSE: OIL): India’s second-largest domestic oil producer.
• Cairn India (Part of Vedanta): Large domestic oil production.

3. Oil's Contribution to the Import Bill

In FY 2025, India imported Crude Oil worth $137 billion in a total import bill of $915.2 billion. Crude oil constituted close to 15% of all imported goods.

Demand-Supply Gap

India produced 29 MMT of crude oil and imported 232 MMT in FY25 — a significant dependency.

Updated Stocks to Watch Table

*Approximate ranges – prices change daily

As an Investor, What Should You Watch?

• Brent Above $80: Raises import costs and fuels inflation worries for India. FIIs can turn cautious.
• Rupee weakness vs dollar: Watch USD/INR moves; if the rupee weakens beyond ₹84, it adds to inflation risks.
• RBI's Stance: Rising inflation from higher oil prices can delay rate cuts. Track RBI policy meetings.

Key Trigger Levels:

• Brent crude above $85: Major negative for Indian markets
• USD/INR above ₹84: Additional pressure on oil importers
• Rupee weakening + Oil rising: Double negative for economy

Final Thoughts

Growing oil prices on the back of the Israel-Iran conflict will affect India directly. With 89% oil dependency, any persistent rise in price will result in inflation, Curtailment of growth, and rupee depreciation.

Some sectors will be negatively impacted by higher crude oil prices, such as airlines, FMCG, and autos, while oil refineries and defence companies may be positively affected.

Historically, rising oil prices have led to:

• Higher inflation
• Tighter interest rate policies
• Slower GDP growth

As an investor, be mindful of Brent crude oil, the rupee, RBI policy, and the specific stocks listed above that have historically reacted to such stock market impact triggers.

Disclaimer:
The information provided in this article is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or an offer to buy or sell any securities. Stock market investments are subject to market risks. Readers are advised to conduct their own research or consult a qualified financial advisor before making any investment decisions. The examples and stock references mentioned are for illustrative purposes only and do not imply any endorsement or prediction of performance.

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