Upstream energy, defence, select refineries to benefit from US-Iran war
A sustained rise in crude oil prices due to the US-Iran war will benefit upstream oil exploration companies, energy infrastructure companies and select refineries while pressuring oil?sensitive sectors such as aviation, paints, tyres, chemicals and logistics, a report said on Monday.
Apart from these sectors, the report from Axis Securities recommended overweight positions also in defence and infrastructure, adding that stocks in less oil-sensitive sectors such as banking, IT services, and healthcare can be maintained unchanged.
“For investors, crude price volatility should not be viewed purely as a risk. It can also create sectoral opportunities and enable disciplined portfolio positioning aligned with macro cycles,” the brokerage said.
Aviation is highly exposed to oil price changes as fuel accounts for roughly 30–40 per cent of operating costs, the brokerage said, adding that petroleum?based raw material inflation will squeeze margins across paints, chemicals and plastics.
Logistics and transportation companies are impacted by higher diesel costs, increasing freight expenses, and reduced margins. Cement producers also face pressure due to rising energy costs, as the industry relies heavily on fuel such as pet coke, the firm forecasted.
The firm said impact on oil marketing companies will depend on government pricing policies, while upstream producers like ONGC and Oil India benefit directly from higher crude prices through improved realizations per barrel.
A sustained increase in crude oil prices influences multiple macro variables, including inflation, interest rates, currency movement, the current account deficit, and overall corporate profitability, the report warned.
Every $1 increase in crude oil prices raises India’s annual import bill by roughly $1.5–2 billion. A $10 rise in oil prices can widen the current account deficit by around 0.35–0.5 per cent of GDP, while a 10 per cent increase in crude prices can push inflation higher by nearly 20 basis points, according to the report.
However, the firm maintained that “India has historically managed oil shocks through policy measures and supply diversification.”
