Asian Paints, IOC, BPCL, Other Crude Sensitive Stocks Fall As Oil Prices Surge 9% After Israel Strikes Iran

Shares of oil marketing companies (OMC), paint, and other crude sensitive companies plunged on June 13 amid sharp rise in crude oil prices. This comes after Israel conducted strikes on Iran.

Following the Israeli airstrikes, Brent crude futures climbed 9% to $74.20 per barrel, the highest since April 2. Meanwhile, US West Texas Intermediate (WTI) crude jumped (8.55%) to $75.35 per barrel, its highest since early February.

"Brent crude prices have flared up by around 12% to $78. It can rise further if Iran, in retaliation, closes the Strait of Hormuz, severely restricting oil supply. The impact on market will depend on how long the conflict lingers. In the near-term the market will be in a risk-off mode. Sectors that uses oil derivatives as inputs like aviation, paints, adhesives and tyres will be hit hard. Oil producers like ONGC and Oil India will remain resilient," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Oil prices jumped more than 13% on Friday to hit their highest in more than two months after Israel launched airstrikes on Iran, raising tensions in the Middle East and sparking fears of a major disruption in global oil supply. Brent and WTI crude both hit their highest levels in months, with prices jumping more than 13% which are current up by 9%.

Israel Strikes Iran:

Israel announced it struck multiple targets across Iran, hitting "dozens" of sites, according to Reuters.

Israel Prime Minister Benjamin Netanyahu said that the country's strikes on Iran were aimed at hurting its nuclear infrastructure, its ballistic missile factories and many of its military capabilities.

However, Two U.S. officials told Reuters that Israel acted alone, with no American involvement.

OMC Stocks Fall Sharply:

Shares of Oil Marketing Companies (OMCs) dropped sharply on Friday. Bharat Petroleum Corporation (BPCL) fell over 4% in early trade reaching 299.30. It is currently trading at 309, down by 3%, while Hindustan Petroleum Corporation (HPCL) lost about 4.5%. Indian Oil Corporation (IOC) to reach its day's lowest of 370.15. The stock is currently trading down around 3% at 381 at 10.30 AM.

Paint Stocks Slide as Crude Prices Rise:

Asian Paints shares dropped nearly 2% in the morning, giving up some gains from the previous session, where a large block deal worth ₹7,703 crore boosted the stock. Currently it is trading at 2194 down by 1.18%.

Indigo Paints and Berger Paints also declined around 4% each during opening hours. At 10.30 AM, the stock is trading at 1095 down by almost 2%, while Berger Paints is trading at 566 down by around 1% at this hour recovering from the early fall.

Crude oil prices play a major role in the decorative paint industry, which depends heavily on raw materials. Paint makers use more than 300 ingredients, and most of them come from petroleum. Since raw materials make up 55-60% of total production costs, any changes in crude oil prices can directly affect the profit margins of paint companies.

In contrast, shares of oil producers such as ONGC and Oil India rose by up to 3% in the early trade, supported by the surge in global crude oil prices.

Crude Oil Price Outlook

Friday's oil surge was driven by the immediate reaction to Israel's strike on Iran, triggering a geopolitical risk premium and raising fears of disruption to global crude supplies.

'A wider conflict in the Middle East could disrupt the Strait of Hormuz, which handles around 20% of global oil traffic. He also noted that the U.S. is preparing to partially evacuate personnel from the region after Iran threatened U.S. bases if nuclear negotiations break down, further heightening geopolitical tensions,' said Jigar Trivedi, Senior Research Analyst at Reliance Securities.

Jigar Trivedi pointed out that oil prices are set for their strongest weekly gain since late February 2022. He added that MCX crude oil may hit the upper circuit limit during the day session and could settle near ₹6,200 per barrel as trading continues.