Stocks in focus: Brent crude oil spikes 3.20% to $80.55 as Middle East tensions fuel supply disruption fears – Explained

Brent crude oil prices have surged by 3.20% today, reaching $80.55 amid escalating tensions in the Middle East, sparking concerns of potential supply disruptions. As geopolitical risks rise, the impact of these soaring crude prices is being felt across global markets, including in India, where several stocks are expected to see movement, particularly in the oil and gas sector.

Upstream oil companies poised to benefit

Indian upstream companies like Oil India and ONGC are set to benefit from the rise in crude prices. These companies, which are involved in the exploration and production of oil, typically gain when crude prices rise as it boosts their revenue from selling oil.

Downstream players under margin pressure

On the other hand, downstream companies such as Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Limited (HPCL), which focus on refining and distributing petroleum products, may come under pressure. Higher crude oil costs can squeeze their margins, as refining and operational expenses rise. While these companies may attempt to pass on some of the cost increases to consumers, their profitability could be impacted in the short term.

Paint sector vulnerable to rising crude costs

In addition to the oil sector, companies in the paint industry are also feeling the effects of higher crude prices. Asian Paints and Berger Paints, which rely heavily on crude oil derivatives for production, have experienced declines in their stock prices. As raw material costs increase, these companies could face narrower margins, leading to price adjustments for consumers and impacting their overall profitability.

Broader sector impact

As Brent crude prices continue to rise, the impact on Indian stocks is likely to vary by sector. Upstream oil companies like Oil India and ONGC are expected to see further gains as higher oil prices boost their earnings. However, downstream companies and paint manufacturers may face challenges in maintaining profitability, with increased costs potentially eroding their margins.