Shares of state-run upstream oil producers Oil & Natural Gas Corporation (ONGC) and Oil India Ltd surged in trade today after crude oil prices climbed sharply amid escalating tensions between Iran, Israel and the United States, raising concerns over potential supply disruptions in the Middle East. ONGC shares were up over 3% near the Rs 290 level at market opening while Oil India shares surpassed Rs 500, up more than 3.6% at opening.
Brent crude rose around 4% to trade near $76 per barrel, as markets priced in heightened geopolitical risk following reports of fresh air strikes and retaliatory threats in the region. The escalation has once again brought the Strait of Hormuz into focus — a critical transit route through which a significant portion of global oil supplies pass.
According to a latest note from HSBC Global Investment Research, oil market risks remain “asymmetrical” under possible Iran scenarios, with Hormuz transit being the main concern. HSBC highlighted that while spare capacity in the Middle East Gulf remains significant, it would not be accessible if Hormuz were to be disrupted. However, the brokerage said its Brent forecast for 2026 remains unchanged at $65 per barrel, suggesting that the long-term outlook depends heavily on how the conflict evolves.
The HSBC note, titled “Strikes on Iran: Oil, economics & markets – a recap of reports & risks”, said US President Donald Trump described a “massive ongoing operation” against Iran after air strikes were launched. The report underlined that economic and market risks hinge on the duration and spread of the conflict.
On currency markets, HSBC noted that the US dollar is likely to have the upper hand in the near term, contrasting with its brief knee-jerk strength during the June 2025 Iran episode. The brokerage cautioned that geopolitical events often give mixed signals for currencies and much depends on broader uncertainty conditions.
Why higher crude prices benefit ONGC and Oil India
Rising crude prices are structurally positive for upstream oil producers like ONGC and Oil India because their revenues are directly linked to global crude realizations.
Higher oil prices typically translate into:
- Improved realization per barrel
- Higher operating margins
- Stronger cash flows
- Better profitability outlook
Unlike oil marketing companies (OMCs), which face margin pressure when crude rises sharply due to retail pricing constraints, upstream producers benefit directly from price increases.
With crude rebounding toward the mid-$70s, investors rotated into exploration and production stocks, betting that sustained geopolitical risk premiums could support realizations in the near term.
Broader market implications
HSBC also noted that while wealth and policy buffers in the Middle East may safeguard core economic order, any fresh conflict could dent sentiment, activity and capital flows in the Gulf region. The oil market reaction remains highly sensitive to developments around Iran and the broader regional security landscape.
Market participants will now closely monitor diplomatic signals, shipping activity through Hormuz and any further military escalation that could materially disrupt supply chains.
For ONGC and Oil India, the near-term stock performance is likely to remain closely tied to crude price movements and the persistence of geopolitical risk premiums in global energy markets.