Iran-Israel Conflict: Crude Oil Prices Surge, Indian Refiners Under Pressure
June 13, 2025: The escalating Iran-Israel conflict has rattled the global oil market, pushing crude oil prices up by as much as 12% in a single session. With geopolitical tensions rising in the Middle East and a looming threat to the crucial Strait of Hormuz, Indian oil refiners like IOC (Indian Oil Corporation), BPCL, and HPCL are facing a double blow — rising crude costs and unchanged retail fuel prices in the domestic market.
📈 Crude Oil Soars as Middle East Tensions Escalate
The market reacted swiftly to reports of Israel’s strike on Iranian nuclear installations and Tehran’s immediate vow for retaliation. As of June 13, WTI crude touched $71/barrel, and Brent surged past $77/barrel in the futures market. Though prices cooled slightly later in the day, the spike dented marketing margins for Indian Oil Marketing Companies (OMCs), heavily reliant on crude imports from the Gulf.
⛽ Impact on Indian Oil Refiners
Despite this international volatility, Indian OMCs have refrained from increasing retail petrol and diesel prices, resulting in margin pressures. Experts estimate that for every $2 increase in Brent crude, OMCs lose ₹1 per litre in marketing margin. With crude hovering in the $65-$70 range recently, margins were healthy. But this spike, if sustained, could severely hit profits.
At 1:30 PM IST on June 13, shares of IOC, BPCL, and HPCL were down 1-2% on the NSE, reflecting investor concern. Here's a snapshot of IOC share price movement:
- 📉 IOC NSE Price: ₹140.91 (-1.45%)
- 📊 Day's Range: ₹137.01 - ₹143.19
🚢 Strait of Hormuz: The World’s Oil Artery Under Threat
Beyond pricing, the bigger threat looms over the Strait of Hormuz — a narrow but critical shipping route between Oman and Iran. Around 20% of global oil trade and 25% of liquefied natural gas (LNG) shipments pass through it. A disruption here could create a domino effect, impacting freight, insurance costs, and ultimately consumer prices in India.
Iran has historically warned of blocking the Strait if threatened militarily. This time, with direct confrontation in the air, the risk is no longer theoretical. India imports 90% of its crude needs, primarily from Saudi Arabia, Iraq, Kuwait, UAE, and Russia. Any blockade here would significantly raise the landing cost of crude oil for Indian refiners.
📉 Downstream vs Upstream Stocks: Diverging Impact
While refiners suffered, Indian upstream companies like ONGC and Oil India (OIL) saw their share prices rise slightly on June 13, anticipating better price realization from higher crude benchmarks.
- 🟢 ONGC up 1.3%
- 🟢 OIL up 1.5%
🇮🇳 India’s Energy Ties With Iran
Iran was once India’s third-largest crude supplier until US sanctions imposed during the Trump era halted imports. Indian oil minister Hardeep Puri reiterated that India would not import from sanctioned countries. However, India remains open to resuming oil trade with Iran should sanctions be lifted — a scenario that may help diversify crude sourcing amidst growing geopolitical risks.
Interestingly, Indian refiners like IOC, BPCL, and HPCL are technically equipped to process Iranian crude, making future trade viable, especially if global dynamics shift again.
🧠Expert Views: What Lies Ahead?
According to Madhavi Arora, Lead Economist at Emkay Global:
“Iran is on the northern side of the Strait of Hormuz. A wider Middle East conflict that affects oil supply routes of Saudi Arabia, Iraq, Kuwait, and UAE could lead to a sharp oil price spike.”
Previously, Indian refiners also faced delays and high costs due to re-routing of Russian oil cargoes through the Cape of Good Hope, to avoid conflict zones near the Red Sea. This underlines the fragility of global oil logistics and its outsized impact on India’s economy.
🔚 Final Thoughts
The Iran-Israel conflict is more than just a geopolitical flashpoint — it’s a real-time test for India's energy resilience. If tensions continue and oil prices remain elevated, Indian OMCs may be forced to raise retail prices or absorb losses, both of which impact the end consumer and national inflation.
For investors, this scenario offers both caution and opportunity — while refiners are under pressure, upstream producers might see a windfall in the short term. Keep an eye on share movements in IOC, BPCL, HPCL, ONGC, and OIL in the coming weeks.
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