MRF, Ceat, JK Tyre, Apollo Tyres: Tyre stocks fall on spike in crude oil price

Shares of tyre manufacturers like Balkrishna Industries, MRF, Ceat, JK Tyre, Apollo Tyres, and Balkrishna Industries tumbled up to 11.5% on Monday, March 2, as a surge in crude oil prices in the international markets sent share prices of these companies downwards.

Shares of JK Tyre fell as much as 11.47% to hit an intraday low of ₹443.60 on the National Stock Exchange (NSE); Balkrishna Industries' stock dropped 4.55% to ₹2,275; CEAT shares declined as much as 11.28% to ₹3,131; MRF shares declined 3.46% to ₹1,36,100; and Apollo Tyre shares fell 5.23% to hit an intraday low of ₹430.

Shares of tyre companies came under selling pressure after crude oil prices surged as much as 12% to hit an intraday high of $81.89 per barrel in international markets after the United States and Israel launched an attack on Iran over the weekend.

Traders were betting the supply of oil from Iran and elsewhere in the Middle East would slow or grind to a halt.

Attacks throughout the region, including on two vessels travelling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, have restricted countries' ability to export oil to the rest of the world. Prolonged attacks would likely result in higher prices for crude oil and gasoline, according to energy experts, the news agency AP reported.

Roughly 15 million barrels of crude oil per day — about 20% of the world's oil — are shipped through the Strait of Hormuz, making it the world's most critical oil chokepoint, according to Rystad Energy.

Tankers travelling through the strait, which is bordered in the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE, and Iran.

Iran temporarily shut down parts of the strait in mid-February for what it said was a military drill, which led oil prices to jump about 6% higher in the days that followed.

Tyre companies use synthetic rubber, carbon black, nylon, and other petrochemicals as raw materials to manufacture tyres, and any spike in crude oil prices directly impacts the margins of these companies, analysts said.

As of 1:45 pm, CEAT shares fell 2.7% to ₹3,436, Balkrishna Industries traded 3% lower at ₹2,304, MRF declined 1.9% to ₹1,38,260, and Apollo Tyres was down 3.13% at ₹439.