As crude oil prices climb amid escalating Middle East tensions, Indian upstream oil firms ONGC and Oil India stand to gain through improved earnings, while oil marketing companies may face pressure due to margin risks and high valuations.
As geopolitical tensions in the Middle East continue to rise, crude oil prices have surged for the second consecutive day, sparking investor interest in India’s upstream oil producers. According to JM Financial, both Oil and Natural Gas Corporation (ONGC) and Oil India Limited are poised to benefit significantly from this price spike.
Brent crude prices hovered near USD 75 per barrel and WTI crossed USD 74 per barrel as of June 16, 2025. The escalation in hostilities between Iran and Israel—including threats to shut the critical Strait of Hormuz by Iran—has raised concerns over global oil supply disruption.
ONGC, headquartered in New Delhi, and Oil India, based in Assam, are among India’s leading upstream oil exploration and production companies. As per JM Financial’s report, for every USD 1 increase in oil price, ONGC and Oil India can expect an earnings per share (EPS) improvement of 1.5–2%.
The report also highlights that these companies are no longer constrained by the earlier USD 75/bbl cap on net crude realization, following the government’s removal of the windfall tax on crude petroleum from December 2, 2024.
JM Financial further notes that the likelihood of the windfall tax being reimposed is low, given the enactment of the Oilfields (Regulation and Development) Amendment Bill, 2024, which assures fiscal stability to attract private and foreign investment into India’s E&P segment.
In addition to crude price support, Oil India is expected to see a sharp rise in earnings from its planned expansion of the Numaligarh Refinery Limited (NRL) from 3 MMTPA to 9 MMTPA by December 2025. The project is backed by excise duty incentives, which could further support its profitability.
JM Financial has maintained a ‘Buy’ rating on Oil India with a target price of ₹500, and on ONGC with a price target of ₹290.
Concerns for OMCs
While upstream firms may gain, oil marketing companies (OMCs) such as HPCL, IOCL, and BPCL face downside risks. JM Financial has issued a ‘Sell’ rating for HPCL and IOCL, and a ‘Hold’ rating for BPCL, citing rich valuations and margin pressures.
The brokerage warned that aggressive capital expenditure plans among OMCs might not yield long-term shareholder value and noted that fuel price controls or excise duty hikes could also limit profitability, even if global oil prices ease.
As of June 2025, HPCL and BPCL are trading at 1.3x FY27 P/B, above their historical averages, while IOCL remains aligned with its long-term average at 0.9x FY27 P/B.
As the Middle East crisis unfolds, market focus remains firmly on energy stocks, with upstream players expected to lead gains while downstream refiners may struggle with narrowing margins.