MUMBAI/NEW DELHI: Oil prices surged more than 4 per cent on Wednesday, with Brent crude topping $70 a barrel for the first time since January 30, as escalating tensions between the United States and Iran raised concerns about potential supply disruptions from the key oil-producing region [citation:1][citation:3].
Brent crude futures settled at $70.35 a barrel, up $2.93 or 4.35 per cent, while US West Texas Intermediate (WTI) crude rose $2.86 or 4.59 per cent to $65.19 [citation:1]. Both contracts posted their highest settlements since January 30, rebounding sharply after plumbing two-week lows in the previous session.
Geopolitical tensions drive rally
The sharp spike in oil prices was driven almost entirely by geopolitical developments. Reports that Israel had raised its alert level on increased indications of a possible attack on Iran by the US and Israel triggered a late-session rally, with both contracts gaining more than $3 toward the close [citation:1].
"The big moves in oil prices today are being solely driven by geopolitics," said Andrew Lipow, president of Lipow Oil Associates. "The oil market is pricing in additional risk of a supply disruption" [citation:1].
Adding to supply concerns were reports of Iran temporarily shutting parts of the Strait of Hormuz, a vital global oil transit route, due to security precautions while its elite Revolutionary Guards conducted military drills [citation:1][citation:3]. Later, state media said the strait had been shut for a few hours, without making clear if it had fully reopened.
Political consultancy Eurasia Group said in a note that it sees a 65 per cent probability of US military strikes against Iran by the end of April [citation:1][citation:3].
- US-Iran tensions: 65% probability of US military strikes by end-April, per Eurasia Group [citation:1][citation:3]
- Strait of Hormuz: Iran temporarily shut parts for military drills, raising supply concerns [citation:1][citation:3]
- Russia-Ukraine: Geneva peace talks end without breakthrough, Zelenskiy calls them "difficult" [citation:1]
- US military presence: Largest regional air power presence since 2003 Iraq invasion [citation:5]
- US inventories: Crude stocks fell 0.6 million barrels, contrary to expectations [citation:3][citation:8]
Russia-Ukraine talks inconclusive
Two days of peace talks in Geneva between Ukraine and Russia ended on Wednesday without a breakthrough, with Ukrainian President Volodymyr Zelenskiy accusing Moscow of stalling US-mediated efforts to end the four-year-old war [citation:1].
"There has been a renewed effort to clamp down on Russian exports, so if these talks do go off the rails as Zelenskiy suggested they are, then we could finally see a material drop in the amount of Russian exports headed to the global market, and that is obviously supportive," said John Kilduff, partner with Again Capital [citation:1].
Energy stocks: ONGC, Oil India gain
Higher crude prices typically benefit upstream oil exploration and production companies like ONGC and Oil India, as they realize better realizations for their output [citation:3].
Oil & Natural Gas Corporation Ltd
ONGC was the top gainer on the Nifty 50, surging 3.84 per cent or ₹10.15 to close at ₹274.75 [citation:2][citation:10]. The stock opened at ₹265 and touched an intraday high of ₹280.30, its 52-week peak [citation:6][citation:9].
Oil India Ltd also gained, rising over 2 per cent in trade [citation:3].
| Company | Closing Price (₹) | Change (%) |
|---|---|---|
| ONGC | 274.75 | +3.84% |
| Oil India Ltd | 532.40 | +2.20% |
| Reliance Industries | 2,845.30 | +0.65% |
OMCs under pressure
Conversely, oil marketing companies (OMCs) faced selling pressure as higher crude prices raise input costs and potentially compress marketing margins if retail prices are not revised upward [citation:3][citation:7].
OMC stock performance
▼ DeclinersBPCL fell more than 2.30 per cent to an intraday low of ₹372.15, before closing 1.86 per cent down at ₹373.80. HPCL slipped 2.8 per cent to ₹444.40, while Indian Oil Corporation declined 1.96 per cent [citation:3][citation:7].
A rise in crude prices generally pressures OMCs as crude constitutes the bulk of their input costs. If petrol and diesel pump prices are not revised upward in proportion to the increase, OMCs may face pressure on marketing margins, potentially weighing on earnings [citation:7]. Elevated crude prices also increase the country's import bill and can stretch companies' working capital requirements [citation:7].
Broader market context
The spike in crude prices came amid a weak session for Indian equities. The BSE Sensex fell 1.48 per cent or 1,236.11 points to close at 82,498.14, while the Nifty 50 declined 1.41 per cent or 365 points to 25,454.35 [citation:2].
The India VIX, a measure of market volatility, surged 11.70 per cent to 13.65, reflecting heightened uncertainty [citation:2].
Despite the near-term spike, supply-side projections remain mixed. OPEC is expected to resume supply hikes in April, and the International Energy Agency has reiterated a supply surplus outlook for 2026, which could limit sustained upside in oil prices [citation:3].
Key takeaways
- Brent crosses $70: Crude settles at $70.35, up 4.35%, highest since Jan 30 [citation:1]
- Geopolitical risk: 65% probability of US strikes on Iran by April-end [citation:1][citation:3]
- Strait of Hormuz: Key oil transit route temporarily shut for drills, raising supply fears [citation:1]
- Upstream winners: ONGC jumps 3.84%, Oil India gains over 2% [citation:2][citation:3][citation:10]
- OMCs under pressure: BPCL, HPCL, IOC fall on margin concerns [citation:3][citation:7]
- Russia-Ukraine: Geneva talks end without breakthrough, supporting prices [citation:1]
What lies ahead
Traders will closely monitor US inventory reports from the Energy Information Administration, due on Thursday, for further cues. Analysts polled by Reuters expect US crude stockpiles likely rose last week, though API data indicated a 0.6 million barrel decline [citation:1][citation:3][citation:8].
The trajectory of US-Iran diplomacy and any potential military action will remain key drivers. As SEB chief commodities analyst Bjarne Schieldrop noted, "Iran knows Trump's negotiation tactics now. It also knows that a disruption in oil exports out of the Strait of Hormuz and a rally in oil prices to $150 per barrel is the very last thing Trump wants" [citation:1].
Disclaimer: This report is based on provisional closing data. Market conditions are subject to change. Please consult your financial advisor before making investment decisions.