Shares of Local Oil Explorers Surge on Supply Disruption Fears

Why It Matters

The price surge lifts margins and cash flow for upstream firms, boosting investor returns, while downstream players face profitability strain. This divergence highlights how geopolitical shocks can quickly reshape sector dynamics in India's energy market.

Key Takeaways

• Brent crude rose above $71, spurring upstream stock gains.
• Oil India up 5.2%, ONGC up 3.6% on price rally.
• HPCL and BPCL fell as higher input costs squeeze margins.
• Geopolitical tension in Strait of Hormuz drives market volatility.
• Analysts forecast further upside for ONGC, Oil India after rally.

Pulse Analysis

The latest flare‑up between the United States and Iran has reignited concerns over the security of the Strait of Hormuz, a chokepoint that handles roughly a fifth of global oil shipments. Joint naval drills and a brief, tactical closure of the waterway sent Brent crude futures above $71 a barrel, reviving the price spikes last seen in 2022. Such supply‑side anxieties tend to ripple through commodity markets, prompting investors to reassess exposure to both upstream producers and downstream refiners worldwide.

In India, the price shock translated into a sharp divergence between exploration majors and marketing firms. Oil India and ONGC, whose earnings are directly linked to realized crude prices, posted gains of 5.2% and 3.6% respectively as higher Brent levels promise stronger cash flows and improved profit margins. Conversely, HPCL and BPCL saw their shares tumble nearly 5% and 3.4% because rising feedstock costs compress refining spreads unless price hikes can be passed to consumers. Technical charts show Oil India holding its 50‑DEMA and ONGC approaching a ₹290‑300 resistance, suggesting further upside.

Looking ahead, the sustainability of the rally hinges on the duration of the geopolitical tension and the broader demand environment. While analysts caution that global oil demand remains muted, any prolonged disruption in the Hormuz corridor could keep Brent elevated, benefitting upstream players but pressuring downstream margins. Portfolio managers may therefore view the current surge as a tactical entry point for exposure to Indian explorers, while simultaneously hedging against potential reversals if the Strait reopens and prices retreat.

Shares of local oil explorers surge on supply disruption fears

ET Bureau · Last Updated: Feb 20 2026, 05:39 AM IST

Geopolitical tensions between the US and Iran, including joint naval drills and temporary Strait of Hormuz closures, have fueled concerns of oil supply disruptions. This led to a surge in crude prices, boosting shares of oil exploration companies like Oil India and ONGC, while impacting oil marketing firms.

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Mumbai: Shares of oil‑exploration companies rallied in a weak market on Thursday as renewed geopolitical tensions between the US and Iran raised concerns of supply disruptions, pushing crude prices higher. Oil India surged 5.2 %, while ONGC gained 3.6 %, tracking the uptick in Brent crude prices. Among oil‑marketing companies, HPCL dropped nearly 5 % and Bharat Petroleum Corporation Ltd (BPCL) fell 3.4 %.

Brent crude futures rose over 1 % to $71.11 per barrel.

“Elevated Brent crude prices are supportive for upstream players such as ONGC and Oil India, as higher realisations strengthen margins and cash flows,” said Ankit Garg, head of Equity Investments, Wealthy Nivesh PMS.

High Brent prices support upstream companies like ONGC & Oil India; Shares of marketing firms fall

For oil‑marketing companies, an increase in crude prices leads to margin pressure because input costs move up immediately. If these companies are unable to pass on the costs entirely, it impacts their profitability.

The pressure on oil prices stemmed from developments involving Iran, where joint naval drills with Russia in the Sea of Oman and the northern Indian Ocean heightened supply concerns. Iran temporarily shut parts of the Strait of Hormuz as a security precaution during military exercises. Given that the route is one of the world’s most critical oil‑shipping lanes, any disruption tends to amplify volatility in crude markets.

“Impact on operating performance will be a function of the duration for which crude oil prices stay elevated,” said Sunny Agrawal, head of Fundamental Research at SBI Securities. “We believe, in the longer run, crude oil prices may remain subdued, as demand is muted and, hence, any spike in stock prices of oil exploration companies should be seen as an opportunity to trim the weights in the portfolio,” he added.

Analysts said charts are pointing to a 5 % up‑move in Oil India and a near 10 % gain in ONGC from Thursday’s closing.

“Oil India has managed to hold its 50 DEMA (Double Exponential Moving Average) with a surge in trading volumes, which suggests more upside from the current level towards the ₹500 zones with immediate support at ₹460 levels,” said Chandan Taparia, head of derivatives and technical research at Motilal Oswal Financial Services.

In the case of ONGC, the stock could move to ₹290‑300. “The stock has been finding sustained buying interest near ₹262‑265 zones in the last 10 sessions and a small follow‑up could lead to the next leg of rally,” said Taparia.