Crude Oil Prices Surge Amid Middle East Tensions

US WTI Crude oil prices have surged to nearly $120 per barrel, a 30% increase from its previous price of $98, driven by disruptions in the Middle East. The conflict in Iran has escalated, obstructing Strait of Hormuz and impacting production and shipping in the region.

Market Impact

The surge in crude oil prices has exerted pressure on the US Dollar, which has risen to around 99. This has further fueled the increase in crude oil prices. Additionally, countries such as Iraq, Kuwait, and Qatar have reported a decrease in their overall production.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Key Figures

• MCX Crude oil March contract: reached its upper circuit limit of 18% at 9868
• Key support: 9000 - 8127
• Immediate resistance: 10,500
• Breakout target: 11,300

Stock Market Impact

The surge in crude oil prices has led to a decline in the Sensex by 2,494.35 points, a 3.16% drop, settling at 76,424.55. The Nifty 50 fell by 752.65 points, or 3.07%, reaching 23,697.80.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Sector Impact

The increase in crude oil prices has a significant impact on various sectors, including:

• Aviation: increased fuel costs can diminish profit margins
• Logistics: escalated costs can strain profitability
• Paints, chemicals, and plastics: higher input costs can pressure profit margins
• Consumer-facing companies: increased transportation and packaging costs can strain profitability

Company Performance

• InterGlobe Aviation Ltd (IndiGo): shares decreased by 3.7% due to elevated fuel prices
• Larsen & Toubro: shares fell by 3.6% amid worries regarding exposure in the Middle East and increasing input costs
• Asian Paints: saw a 2.7% drop attributed to escalating raw material and logistics expenses

Technical Views

• Oil marketing companies: HPCL, BPCL, and Indian Oil Corporation have opened sharply lower by around 5%
• Technical trend: the broader trend across all three counters remains intact, with rising 10, 20, and 50-day moving averages as well as supportive weekly and monthly trend structures.