Oil prices inch closer to $100 per barrel. What does it mean for Indian stocks?

Global oil prices could soar to as high as $150 per barrel if the escalating conflict in the Middle East disrupts energy supplies from the Gulf, Qatar’s Energy Minister Saad al-Kaabi warned, cautioning that such a surge could deal a severe blow to the global economy. In an interview with the Financial Times, al-Kaabi said a prolonged war in the region could force Gulf energy exporters to shut down production within weeks.

He also noted that even if hostilities were to end immediately, it could still take “weeks to months” for Qatar to restore normal delivery cycles after an Iranian drone strike on the country’s largest liquefied natural gas facility.

This comes as Israel, the US and Iran continue to trade strikes for an eighth straight day. Just last week, before the conflict erupted, crude was hovering around $62 per barrel. By Friday, however, U.S. crude futures had spiked as much as 12% amid fears of supply disruptions before trimming some gains. Brent crude settled at $92.69 per barrel, up $7.28, or 8.52%, while West Texas Intermediate (WTI) jumped $9.89, or 12.21%, to close at $90.90 per barrel.

Markets have been rattled as the escalating conflict in the Middle East has disrupted shipping and energy exports through the crucial Strait of Hormuz. This narrow chokepoint between Iran and Oman normally carries around one-fifth of the world’s crude oil and liquefied natural gas supplies.

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Why is this massive for us?

India imports the majority of its crude oil requirements, and about half of those imports pass through the Strait of Hormuz. Roughly 2.6 million barrels per day of India’s oil flows through the corridor.

The Middle East takes 17% of India's goods exports, on par with the US and the EU, supplies 55% of its crude oil, and accounts for 38% of worker remittances, which amounted to $45 billion in FY24 alone, according to calculations by global brokerage firm Jefferies.

For equity markets, a spike toward $150 oil would likely trigger a broad risk-off reaction. Higher energy costs raise input prices for companies, compress corporate margins and weaken consumer spending.

Historically, sectors such as aviation, paints, chemicals and logistics tend to face the most pressure when oil prices surge sharply. At the same time, upstream oil producers and energy companies typically benefit from higher crude prices.

Short-term price spikes triggered by geopolitical tensions often reverse if supply routes reopen quickly. However, a sustained disruption to Gulf exports could push global markets into a period of higher inflation, weaker growth and increased volatility.

How will the Indian stock market open on Monday?

The Indian equity markets are likely to begin the upcoming week on a cautious note as global risk sentiment has deteriorated sharply. The current trend in GIFT Nifty, which closed around the 24,300 level, indicates a bearish undertone compared with the previous Nifty close near 24,450, Hariprasad K of Livelong Wealth said.

This combination of macroeconomic uncertainty and geopolitical risk is likely to influence market sentiment in the near term. Unless there is a positive development in the Middle East conflict that brings crude oil prices lower, Indian markets could witness continued volatility.

From a technical perspective, Pravesh Gour of Swastika Investmart said that Nifty is taking support near 24,300 but remains highly volatile. On the upside, the 24,900 to 25,000 range is expected to act as an immediate supply zone, where selling pressure could emerge if the index attempts a recovery. On the downside, 24,300 remains the first key support, and if the index slips below this level, 23,800 will be the next important support area that traders will closely monitor.

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