Rising tensions in West Asia are weighing on crude-sensitive stocks as fears of oil supply disruptions unsettle Dalal Street. Brent crude futures jumped to $82.77 per barrel in early deals on Wednesday, the highest since July 2024 and up nearly 17% in four sessions.
Oil refiners, rubber product makers, tyre and tube manufacturers, and paint companies fell about 3.2% on average in early trade on 4 March. The sectors have slid nearly 7% over the past two days, while the benchmark Nifty 50 index has fallen just 2% since 2 March, highlighting the outsized impact on stocks most exposed to crude following the US-Israel-Iran flare-up.
“Oil and its derivatives account for 40-70% of raw material costs of these sectors, which leaves (their) margins vulnerable to rising crude prices,” said Devarsh Vakil, head of prime research at HDFC Securities.
Ghosts of the past
Indian markets have faced similar pressure before. When Brent crude surged 73% to a peak of $130 per barrel between December 2021 and March 2022, shortly after the Russia-Ukraine war began, India Inc.’s profit margins came under swift pressure.
A Mint analysis of Centre for Monitoring Indian Economy (CMIE) data shows that operating profit margins of oil refiners, rubber product makers, tyre and tube manufacturers, and paint companies compressed by an average 140 basis points between the December quarter of FY22 and the June quarter of FY23.
While most sectors began to feel mild pressure as early as Q4FY22, the squeeze peaked for rubber products and tyre and tube makers in Q1FY23. For refiners and paint companies, however, the pain lingered longer: operating margins for refineries nearly halved, while paint companies saw about a 3.2 percentage point compression as the stress extended into the September quarter, Mint’s analysis showed.
Raw material costs, which accounted for roughly 55% of net sales for crude-linked companies in Q3FY22, rose to nearly 60% by Q1FY23 after the Russia-Ukraine war began, eroding profitability across the board.
“What’s common is that most of the sectors that fell during the Russian invasion of Ukraine have fallen again,” said Akshay Chinchalkar, managing partner and head of markets strategy at The Wealth Company. “Clearly, rising crude prices are playing spoilsport for them.”
A deeper cut
As the West Asia conflict entered its fifth day, analysts at JPMorgan Chase warned that a blockade of the Strait of Hormuz — a key chokepoint for global oil supply — lasting more than three weeks could push crude toward $120 a barrel. This could potentially outpace the surge seen during the Russia-Ukraine war and inflicting a sharper hit on India Inc’s margins.
Crude-linked companies could feel the pressure acutely, having benefited from a margin tailwind after crude slipped below $60 a barrel in December 2025. By Q3 FY26, raw material costs had eased to around 51% of net sales, lifting average net profit margins to 14% from 11.6% in Q3 FY22, Mint’s analysis showed.
Oil marketing companies were the largest beneficiaries, with net profit margins climbing to a four-year high of about 6% in Q3FY26. However, a sustained rise in crude prices could squeeze marketing margins going forward, Vakil of HDFC Securities noted. “Every 50 paise per litre change in fuel margins could lead to a 7-10% impact on their Ebitda.” Ebitda stands for earnings before interest, tax, depreciation and amortisation.
Similarly, the paint industry, already grappling with margin stress, could see pressure intensify if crude remains elevated. A January Crisil Ratings study noted that operating margins of established paint companies could remain constrained amid rising competition and limited pricing power, an outlook premised on soft input costs, now at risk as crude climbs.
Analysts caution that current valuations of crude-linked sectors are largely built on assumptions of benign input costs. A sustained spike in crude, they warn, could force a reset in both earnings expectations and valuations. “If Brent sustains above $90 (per barrel) it would be bad news for them and the economy,” Vakil added.