Crude oil prices ease after sharp rally: How they affect India’s economy, banks, FMCG, airlines and paint stocks

Crude oil prices eased in early trade on Thursday after posting their biggest single-day gains in months, as oil tankers continued to move out of the Middle East despite a sharp escalation in the US-Iran conflict. However, geopolitical tensions and concerns over disruptions to global energy supplies kept market sentiment on edge.

Brent crude futures fell USD 1.29, or 1.42 per cent, to USD 89.45 a barrel, while US West Texas Intermediate (WTI) crude declined 56 cents, or 0.66 per cent, to USD 83.90 a barrel in early trade. The decline came after Brent had surged 7.91 per cent and WTI climbed 6.56 per cent in the previous session, reversing losses seen earlier this week.

The slight pullback in crude prices followed Wednesday’s sharp rally, with traders booking some profits as shipping activity from the Middle East continued despite rising military tensions.

The previous session had seen one of the strongest gains since the US-Iran conflict intensified, driven by fears that fresh military action could disrupt oil exports from the Gulf region.

While prices eased on Thursday, they remained significantly higher than levels seen earlier this week as investors continued to monitor developments in West Asia.

Market participants said the movement of oil tankers from the region helped ease immediate supply concerns, although uncertainty over future shipments remained high.

The Strait of Hormuz continued to remain the biggest concern for global energy markets. Around one-fifth of the world’s oil and gas shipments traditionally pass through the strategic waterway.

Shipping through the strait has remained severely disrupted since the start of the US-Iran conflict in February despite diplomatic efforts to ensure safe passage for commercial vessels.

Iran has rejected a proposal from Oman for regional joint management of the strait, reducing hopes of an early breakthrough. At the same time, Iran claimed it had targeted three oil tankers transiting through what it described as an unauthorised route in the Strait of Hormuz.

The developments have reinforced fears that any prolonged disruption in the waterway could tighten global oil supplies and keep crude prices elevated.

The conflict widened further after US and Saudi forces carried out air strikes on Iran-backed paramilitary targets in Iraq on Wednesday in response to drone attacks on Saudi oil facilities.

Separately, US Central Command (CENTCOM) said it launched a “heavy wave of strikes” against dozens of Islamic Revolutionary Guard Corps (IRGC) targets inside Iran. According to CENTCOM, the strikes targeted military command centres, missile and drone facilities, coastal defence sites and maritime infrastructure.

The US military said the operation followed attempted Iranian ballistic missile attacks on American forces in West Asia, adding that all incoming missiles were intercepted.

US President Donald Trump also reiterated that Washington would respond strongly to Iran, saying military action would continue if required while leaving the door open for a possible diplomatic agreement in the future.

Apart from the Strait of Hormuz, concerns have also intensified over the Red Sea shipping route. An Iran-backed group in Yemen earlier announced a naval blockade targeting Saudi Arabia in the Red Sea, expanding attacks on commercial tankers and threatening traffic through the Bab el-Mandeb Strait, another key global oil transit route.

The conflict also appeared to spread beyond the Gulf after a drone strike triggered an explosion on a US-owned liquefied natural gas (LNG) vessel at Egypt’s Damietta Port, raising concerns that critical energy infrastructure across the region could increasingly come under threat.

Despite Thursday’s decline, analysts said crude oil prices are likely to remain highly volatile as traders assess the evolving geopolitical situation.

Any further disruption to oil exports from the Gulf region or attacks on energy infrastructure could tighten global supplies and push prices higher. On the other hand, uninterrupted movement of tankers and any diplomatic progress could help limit further gains.

With more than 50,000 US troops remaining deployed across West Asia and military operations continuing on multiple fronts, investors are expected to closely monitor developments that could influence global oil supply and energy markets in the coming days.

India imports around 85-90 per cent of its crude oil requirement, making it highly dependent on global oil prices. When crude oil prices rise, India’s import bill increases, the rupee comes under pressure, inflation rises, and the current account deficit widens. This can slow economic growth and weigh on market sentiment. On the other hand, lower crude oil prices help reduce inflation, improve the country’s finances and support economic growth.

The Indian stock market generally reacts negatively to a sharp rise in crude oil prices. Higher oil prices increase costs for companies and reduce profit margins. They also raise inflation concerns, which may lead the Reserve Bank of India (RBI) to keep interest rates higher for a longer period. Lower crude oil prices, however, are usually positive for the stock market as they reduce costs and improve corporate earnings.

The banking sector is indirectly affected by crude oil prices. Higher oil prices can lead to higher inflation and interest rates. This may slow loan growth and reduce demand for credit, which can impact bank earnings.

FMCG companies are also affected by higher crude oil prices. Packaging materials, transportation and logistics become more expensive, increasing overall costs. Companies may raise product prices, which can affect consumer demand. Lower crude prices help improve margins and support sales.

The paint sector is among the most sensitive to crude oil prices because many of its raw materials are made from crude oil. When crude prices rise, production costs increase, and profit margins come under pressure. Lower crude prices reduce raw material costs and improve profitability.

Airline companies are among the biggest losers when crude oil prices rise. Aviation turbine fuel (ATF), which is linked to crude oil, is one of their biggest expenses. Higher fuel prices increase operating costs and reduce profits. Lower crude prices help airlines cut fuel costs and improve earnings.

The oil and gas sector sees a mixed impact. Upstream companies such as ONGC and Oil India benefit from higher crude oil prices because they earn more from oil production. However, oil marketing companies such as IOC, BPCL and HPCL may face pressure if they are unable to fully pass on higher crude costs to consumers, which can affect their margins.