Crude oil prices crashed to multi-month lows after US President Donald Trump announced that the United States and Iran have completed a key step towards an active peace agreement, set to be signed later this week. As reported by Live Mint, Brent crude futures declined $4.33, or nearly 5%, to $83.00 a barrel, while US West Texas Intermediate (WTI) crude fell $4.54, or 5.35%, to $80.34 a barrel. The announcement of a likely peace deal to be signed on June 19 sent global markets soaring on Monday, with the BSE Sensex and Nifty 50 indices surging over 1.3% each in intra-day deals. Buying was seen across-the-board with auto, financial services, metals, real estate and consumer durables indexes rallying up to 3.5% during the day. According to Emkay Global Financial Services, the US-Iran deal and expected reopening of the Strait of Hormuz have pushed Brent crude below $85 per barrel, though the brokerage cautioned that persistent supply-demand imbalances could drive prices back towards $90 per barrel in coming weeks.
Shares of Hindustan Petroleum Corporation Limited, Indian Oil Corporation, and Bharat Petroleum Corporation Limited surged significantly on Monday, with gains reaching up to 5.5% as crude oil prices dropped to a multi-month low. As reported by Live Mint, HPCL shares jumped as much as 5.5% to ₹410 apiece, BPCL gained 4.8% to ₹316.75, and IOC advanced 5.4%. The rally reflects the typical benefit these companies derive from lower crude oil prices, as they procure crude oil, process it into fuels, and market the finished products. Since retail fuel prices do not always move in tandem with fluctuations in crude prices, a sharp rise in oil costs can weigh on profitability by narrowing refining and marketing margins. According to SBI Securities, oil marketing companies (OMCs) could emerge as the biggest winners with companies such as Indian Oil, BPCL and HPCL likely to gain from lower crude procurement costs and improved marketing margins. The brokerage expects crude oil prices to settle around $70 per barrel over the medium to long term, with prices potentially declining further if sanctions on Iran are lifted and Iranian crude supplies return to global markets.
Iran has effectively enforced a blockade in the Strait of Hormuz since early March, requiring ships to obtain clearance before passing through the route or risk being targeted. According to The Economic Times, the restrictions were imposed after US and Israeli strikes reportedly killed Iran's Supreme Leader Ayatollah Ali Khamenei along with several senior leaders. The Strait of Hormuz remains one of the world's most critical oil chokepoints, with roughly 20% of global oil supply moving through the passage before the conflict. As reported by Live Mint, the world has lost millions of barrels of oil and gas supply since the closure of the Strait of Hormuz, a key chokepoint that handles roughly one-fifth of global oil and liquefied natural gas shipments, for more than three months. The Strait of Hormuz will be "opening" on Friday following the signing of the agreement with Iran, as confirmed by Trump on Truth Social. According to Emkay Global Financial Services, the brokerage expects crude oil prices to fall to $70 per barrel by end-FY27, though it cautioned that delays in supply normalization could provide support to oil prices and limit further downside.
The end of the war promises to benefit a range of crude-sensitive sectors by lowering oil prices, reducing disruption risks and easing freight and insurance costs. If Brent crude settles at $75-85 a barrel over the next 12 months, these sectors could see the biggest earnings upgrades, according to brokerages and analysts. Among NSE's sectoral indices, the PSU Bank index was the worst-hit, tumbling 13% since the start of the war, followed by Nifty Oil & Gas (down 10%) and Nifty IT (down 9%). According to SBI Securities, aviation could be a key beneficiary given that fuel accounts for nearly 40% of airline operating costs. With jet fuel prices easing and policy support remaining strong, IndiGo, India's largest airline, could see earnings upgrades over the next one to two quarters. The Indian government approved a ₹10,000-crore price stabilization fund to shield domestic airlines from soaring jet fuel costs, while providing 25% reduction in landing and parking charges at major airports. Commercial vehicles could also benefit with lower oil prices supporting Tata Motors, Ashok Leyland, and vehicle financiers such as Shriram Finance and Cholamandalam Investment and Finance. Consumer goods companies such as Hindustan Unilever, Godrej Consumer Products, and Bajaj Consumer Care could see lower packaging costs supporting margins.
The latest rally comes after a prolonged period of significant losses for oil marketing companies, with HPCL, BPCL and IOC falling 12%, 22% and 25% respectively since the war began in late February. As reported by NDTV Profit, these companies were expected to report combined Ebitda losses of around ₹55,000-60,000 crore in the first quarter of FY27, compared to a normalised Ebitda run rate of ₹30,000 crore a quarter. Marketing margins had been at negative ₹14 per litre during the conflict period, but have now turned positive at ₹4.6-4.8 per litre based on current crude prices. This marks the first time marketing margins have turned positive since the first week of March. Notwithstanding the price increases, state-owned oil companies continue to lose about ₹650 crore per day as retail rates lag costs, according to a PTI report. According to Jefferies, marketing losses on petrol and diesel have narrowed to around ₹2 per litre and ₹11 per litre, respectively, with marketing profitability potentially moving above historical averages as refining margins return to normal levels. OMCs raised petrol and diesel prices by a cumulative ₹7.50 per litre each in May, alongside a ₹89 increase in LPG cylinder prices, pushing household cylinder costs to ₹942 in Delhi.
