Indian refiners slumped on Monday as a widening US-Israeli war with Iran pushed Brent crude to a nearly four-year high, threatening their near-term earnings and raising the risk of further government intervention.
State-run Indian Oil dipped 4.6 per cent, Hindustan Petroleum slid 4.9 per cent and Bharat Petroleum dropped 5.4 per cent, with BPCL heading for its steepest fall since June 2024.
The rout dragged the Nifty oil and gas index down 2.7 per cent and the energy index 2.1 per cent lower, while the benchmark Nifty 50 slid 2.8 per cent. The oil and gas index has fallen 6.6 per cent since the US-Israeli strike on Iran last week.
India's top refiner Reliance Industries was down 0.4 per cent after slipping 2.5 per cent earlier.
UBS said Indian oil marketing companies are exposed to the crude spike because their fuel sales far exceed their production - roughly double for IOC and BPCL, and even more for HPCL.
The brokerage downgraded IOC and BPCL to "neutral" and HPCL to "sell" from "buy".
It also reduced fiscal 2027 profit estimates by 19 per cent for IOC, 15 per cent for BPCL and 46 per cent for HPCL.
Oil prices surged about 26 per cent to $119.5 per barrel - the highest since July 2022 - as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market.
Iraq and Kuwait have begun reducing oil output, adding to earlier liquefied natural gas (LNG) cuts from Qatar as the war disrupted shipments out of the Middle East.
Citi on Monday warned refiners' earnings will hinge on how long the geopolitical shock persists, flagging risks from any potential closure of the Strait of Hormuz and shutdowns in Qatar's LNG output - each supplying roughly half of India's crude and LNG needs.
India, the world's second-biggest importer of LPG, consumed 33.15 million tonnes of the cooking gas last year, with imports meeting about two-thirds of demand. Middle Eastern suppliers account for 85 per cent-90 per cent of India's LPG inflows.
New Delhi on Friday invoked emergency powers directing refiners to maximise liquefied petroleum gas production to prevent a cooking-gas shortage following supply disruptions.
Prolonged turmoil could force additional government intervention, including export curbs, duties on refined products or direct budgetary support, Citi added.
Meanwhile, Indian companies raised LPG prices for the first time in about one year on Friday, tracking global benchmarks as the war crimps flows from the Middle East.
India imports more than 80 per cent of its crude oil needs and is the world's third largest oil importer.
(Reporting by Kashish Tandon and Yagnoseni Das in Bengaluru; Editing by Sumana Nandy)