Petrol, Diesel Prices May Rise ₹20 Per Litre in 3-6 Months if Crude Oil Remains Above $100, Warns Emkay Research

Global Energy Prices Surge Amid US-Iran Peace Negotiations Stalemate

Crude oil prices rose sharply on Monday, fueled by concerns over potential disruptions to Middle East energy exports following stalled US-Iran peace negotiations. The continued closure of the Strait of Hormuz has intensified supply concerns, leading to a significant increase in global energy prices.

According to market data, Brent crude rose 2.63% to $108.10 per barrel, while US West Texas Intermediate (WTI) crude futures advanced 2.44% to $96.70. The surge in energy prices poses a significant challenge to India's macroeconomic stability, with analysts warning of potential inflationary pressures and broader macroeconomic risks.

India's Crude Basket Trades at $110 per Barrel

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

Analysts at Emkay Global Financial Services believe that a prolonged closure of the Strait of Hormuz will likely compel the government to increase retail fuel prices. They expect an initial hike of ₹10 per litre, which may not fully offset the under-recoveries of oil marketing companies (OMCs). However, a steeper increase could trigger substantial inflationary pressures and broader macroeconomic risks.

Estimated Impact on OMCs and Consumers

India's crude basket is currently trading around $110 per barrel. At these levels, under-recoveries for OMCs are estimated at approximately ₹18–20 per litre for petrol and diesel, even after the ₹10 per litre excise duty cut announced on March 27, 2026. Emkay estimates that a 10% increase in retail fuel prices strikes a balance between alleviating OMC losses and containing consumer impact.

Comparison of Under-Recoveries for OMCs

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

Emkay expects additional rounds of price hikes if crude oil prices remain above $100 per barrel for the next two to three quarters. In such a scenario, retail fuel prices could rise by ₹18–20 per litre over the next three to six months.

Estimated Inflationary Impact

The brokerage estimates an inflationary impact of approximately 75 basis points, including second-order effects. However, this is not the base case, as Emkay assigns a low probability to a prolonged geopolitical stalemate in the Gulf.

Sectoral Impact

Emkay Global expects several sectors to face headwinds from higher fuel prices:

• Automobiles and Auto Ancillaries: Likely to be negatively impacted, although electric vehicle players such as Ather Energy could benefit.
• NBFCs: Companies such as Mahindra & Mahindra Financial Services, Shriram Finance, and Cholamandalam Investment may face pressure.
• Logistics: Firms including VRL Logistics, Delhivery, Blue Dart Express, and TCI Express are expected to see margin compression.
• Metals: Hindalco Industries and Jindal Steel could be adversely affected due to higher input costs.
• Retail and Consumption: Varun Beverages, QSR operators, and Metro Brands may see demand pressures.
• Telecom Infrastructure: Indus Towers could also face indirect headwinds.