How Boiling Crude Oil Impacts India's Stock Market?

New Delhi: : India’s domestic stock market indices Sensex and Nifty closed in red for the fifth straight trading session on Friday, October 2024. Both the market gauges are down by more than 3% in the last five days. Markets have seen bloodshed recently due to reasons which are plenty. The most prominent one being the rising tension between Iran and Israel.

Bent Crude Prices Up 10% In Last Five Days

Israel’s latest warning pertaining to retaliatory strikes on Iran’s oil and gas infrastructure has set the crude oil prices on the boil. In last five days, global oil benchmark Bent Crude prices have shot up around 10%. At the time of writing this article, its prices hovered near $78.44 per barrel. In as many days, markets have tumbled and oil prices have gone up. These two have followed trajectories in opposite directions.

How Rise In Crude Oil Prices Weight On India’s Stock Market?

But what’s even worse is that, international petroleum prices can rise even further. Crude oil is imported in India through vessels which sail on the Red Sea route. In the wake of continued middle east tension, repeated attacks from terrorist group Houthis on  these vessels have made import difficult.  If this is not stopped, it will lead to supply shortage. Moreover, Israel’s strike on Iran can disrupt global supply chain of crude oil. In such a scenario, all eyes will be on oil supply carter Organisation Of the Petroleum Exporting Countries (Opec). If the organization doesn’t increase production, then, it will further scale up crude oil prices.

As it is a known fact, Saudi Arabia has a larger say amongst all the Opec members. The gulf country has earlier intended not to increase oil supply. The cartel plans to stick to production cut plan made earlier.

Crude Oil Price Hike Impacts OMC, Airline Stocks

If crude oil prices are not checked, it will hurt margins of Oil Marketing Companies (OMCs) in India. As a result, share prices of oil retailers can fall. Infact, the negative sentiments that have build up regarding oil prices have already started to reflect in share prices of the OMCs.

In last five days, BPCL share price has fallen more than 2%. While, HPCL share price has plunged in excess of 4% in as many days. IOL share price is too down 2% during the same period.

Similar is the case of airline stocks. Indigo is down more than 5% in last five days. While, Spicejet had plummeted 4% on Friday.