Indian Oil, Asian Paints, JK Tyre, IndiGo shares jump as US-Iran peace deal sends oil prices tumbling

Shares of crude oil-linked companies such as oil marketing companies (OMCs), paints, tyres, and aviation, were trading with notable gains in the early trade on Monday, June 15, as crude oil prices tumbled in the international market.

On the other hand, oil upstream firms such as ONGC and Oil India (OIL) were in the red following a sharp drop in oil prices.

Oil prices dropped over 4% in the early trade after US President Donald Trump announced that the United States and Iran have completed a key step towards an active peace agreement, which is set to be signed later this week.

"The Deal with the Islamic Republic of Iran is now complete. Congratulations to all!" US President Donald Trump wrote on his Truth Social platform. "I hereby fully authorize the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade."

"Ships of the World, start your engines. Let the oil flow!" Trump added.

Why the fall in crude oil prices is positive for India

A fall in crude oil prices is generally positive for India because the country imports more than 85% of its crude oil requirements. Lower oil prices reduce the import bill, ease pressure on the current account deficit and the rupee, and help keep inflation in check. Cheaper crude also benefits sectors such as aviation, paints, tyres, oil marketing companies, and logistics by lowering fuel and raw material costs, potentially boosting profitability.

Why is a slide in crude oil prices positive for OMCs, paints, tyres, and aviation companies?

A decline in crude oil prices is generally positive for several sectors because it lowers fuel and raw material costs, improving margins and profitability.

When last seen, IOC shares were trading 3.52% higher at ₹145.90 apiece on the NSE, while Bharat Petroleum Corporation (BPCL) was trading around 4% higher at ₹313.85 on the NSE. Hindustan Petroleum Corp Ltd (HPCL) shares traded at ₹403.80 apiece on the NSE, down 3.83%.

When last seen, Asian Paints was trading 2.66% higher at ₹2,820.50 on the NSE, while Kansai Nerolac Paints shares were up 1.42% higher at ₹219.58 apiece.

In short, falling crude prices are viewed as a tailwind for sectors where fuel or petroleum-derived inputs form a significant part of operating costs.

Why is it generally negative for oil upstream firms like ONGC and Oil India?

A fall in crude oil prices is generally negative for upstream oil companies because their revenues and profitability are directly linked to the price at which they sell crude oil.

Companies such as Oil and Natural Gas Corporation (ONGC) and Oil India explore and produce crude oil. When global crude prices decline, the revenue they earn for each barrel of oil sold also falls, which can reduce revenue, operating profits, and cash flows.

In simple terms, while lower crude prices benefit consumers and oil-consuming industries, they typically hurt oil producers because they receive less money for the same volume of oil produced and sold. This is why ONGC and Oil India often underperform when crude prices witness a sharp decline.