OMCs Plummet Up to 5.5% as Crude Oil Price Remains Above $100 Amid US-Iran Tensions

Indian Oil Marketing Companies Under Pressure as Crude Prices Remain Elevated

Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) stocks declined sharply on Monday, 5.3%, 5%, and 4.7% respectively, as crude oil prices stayed above the key psychological mark of $100 per barrel.

The latest selloff reflects investor concern that elevated crude prices could erode marketing profitability, especially if retail fuel prices remain unchanged. Brent crude traded near $105 per barrel on Monday, while the U.S. benchmark crude gained 1% to $99.68 per barrel.

The Strait of Hormuz, a critical waterway that carries over 20% of the world's oil and gas shipments, has been effectively shut to traffic due to the Iran-Israel-US war. This has led to a surge in crude prices, with Brent crude climbing more than 40% since the war began.

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HDFC Securities noted that the near-term margin picture for OMCs has weakened as crude prices have jumped while transportation fuel prices at the retail level have remained unchanged. The brokerage expects the integrated margin of OMCs to decline in the near term compared to the 9MFY26 reported margin ranging from INR 8/ltr to INR 12/ltr.

However, HDFC Securities also noted that higher crude prices could lead to inventory gains, which may provide some support to reported margins in Q4FY26. The brokerage also expects gasoline and diesel cracks to remain elevated, helping gross refining margins expand significantly.

Elara flagged a sharp earnings risk for the sector if crude remains elevated and there is no relief through a fuel price hike, tax cut, or higher LPG subsidy. The brokerage noted that OMCs are among the hardest hit in a high-crude environment, with higher refining margins able to only partly offset the collapse in retail margins and rising LPG losses.

For now, HDFC Securities has maintained its buy recommendation on all OMCs. The near-term outlook remains tied to the direction of crude prices and the duration of the Strait of Hormuz disruption. If oil stays above $100 and retail fuel prices remain unchanged, pressure on marketing-led earnings could continue, with IOC seen as relatively better placed than BPCL and HPCL.

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