RIL, HPCL and other downstream stocks soar up to 9% as crude crashes 15% after the US-Iran ceasefire. What’s next for investors?

Shares of Reliance, Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation (IOCL) and Bharat Petroleum Corporation (BPCL) among others rallied up to 9% on Wednesday after crude oil prices plunged nearly 15%, following U.S. President Donald Trump’s announcement of a two-week ceasefire with Iran, linked to the immediate and safe reopening of the Strait of Hormuz, a key route that handles about one-fifth of global oil flows.

The development holds major significance for downstream stocks such as BPCL, IOCL, HPCL as a drop in oil prices drastically reduces their input costs. Brent crude fell $14.84, or 13.6%, to $94.43 a barrel, while WTI declined $16.13, or 14.3%, to $96.82 a barrel as of 0023 GMT. The three rose 7%, 6%, and 9% respectively. Meanwhile, Reliance Industries rose over 2%.

The shift in stance came just ahead of Trump’s deadline for Iran to reopen the Strait of Hormuz, a key route that carries 20% of the world’s oil supply, or face broad attacks on its civilian infrastructure. “This will be a double-sided CEASEFIRE!” Trump wrote on social media. Earlier on Tuesday, he had warned that “a whole civilization will die tonight” if his demands were not met.

On the flipside, the ceasefire is a fundamental negative for upstream oil companies such as ONGC, and Oil India, which tanked 4% each. Higher prices directly increase their revenue per barrel, possibly lifting profit margins.

Where are prices headed?

International brokerage Macquarie has said that even if tensions ease in the near term, oil prices are likely to find support in the $85–$90 range.

Experts say if ongoing tensions persist, the outlook for crude oil remains volatile and tilted upward. Continued conflict in the Middle East, especially disruptions around the Strait of Hormuz, would keep supply chains constrained, pushing Brent and WTI prices higher and sustaining inflationary pressures worldwide.

“Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future, and the market will price in heightened risk to the Strait of Hormuz going forward,” MST Marquee analyst Saul Kavonic, told Reuters.

Last month, international brokerage firm UBS downgraded HPCL, BPCL, and IOCL. The international brokerage revised target prices to Rs 175 for IOCL from Rs 190, Rs 365 for BPCL from Rs 425, and Rs 340 for HPCL from Rs 540.
Rising geopolitical tensions and the recent surge in crude prices have created uncertainty around earnings for Indian state-owned oil marketing companies, drawing parallels with the oil market disruption seen in 2022, UBS analysts said.

Oil marketing companies such as HPCL, BPCL and Indian Oil are the most vulnerable, Elara Securities said in a note. Higher gross refining margins may offer some cushion, but they are unlikely to fully offset the hit from shrinking retail margins and rising LPG losses.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)