Brent Crude oil surged to a high of $78.45 per barrel today following Israel’s strike on Iran, reflecting heightened geopolitical tensions. Just last month, crude oil had touched a low of $58.75 per barrel. Since then, in less than two months, it has climbed by approximately 33.53 percent, marking a sharp rebound in global oil prices.
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Rising U.S.-Iran tensions have led the U.S. to withdraw non-essential staff from parts of the Middle East, including embassies in Baghdad, Bahrain, and Kuwait. An explosion at Iran’s Natanz nuclear facility followed Israeli airstrikes, prompting Iran to vow retaliation and close its airspace.
Israel has declared a state of emergency. These developments risk escalating regional conflict, affecting global oil markets, especially given Iraq’s major role as OPEC’s second-largest oil producer after Saudi Arabia.
J.P. Morgan has given a range of targets, stating that an attack on Iran might spike Crude Oil prices to $120, which is 62 percent up from current levels of $74. J.P. Morgan has further said that if geopolitical concerns are downplayed, the target could be low to mid $60 for 2025 and $60 in 2026.
Major OMCs (Oil marketing companies), Hindustan Petroleum, Indian Oil, and Bharat Petroleum saw a huge sell-off today amid rising Crude oil prices. However, shares of ONGC and Oil India saw an uptick amid a weak market. ONGC rose by 2 percent, and Oil India by 3 percent.
ONGC and Oil India are primarily upstream oil companies, meaning their main business is exploring, drilling, and producing crude oil. Because they sell the crude oil they extract, rising global oil prices directly benefit them by increasing their selling price and, in turn, their revenue. CNBC TV18 states that for every $1 increase in the price of crude oil (per barrel), ONGC and Oil India could earn Rs. 300 to Rs. 400 crore more in annual revenue.
So, If crude oil prices rise from $78 to $120 per barrel, a jump of $42, it could significantly boost the revenues of upstream oil companies like ONGC and Oil India. Based on industry estimates, these companies gain between Rs. 300 crore to Rs. 400 crore in annual revenue for every $1 increase in oil prices. Therefore, a $42 increase could translate into an additional Rs. 12,600 crore to Rs. 16,800 crore in annual revenue.
However, this represents a substantial gain; it’s important to note that this figure reflects revenue, not net profit, and actual earnings will also depend on operational costs, taxes, and other economic factors.
Written By Abhishek Das
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