IndiGo, SpiceJet Jump Up To 8% As Crude Oil Slumps After US-Iran Peace Deal

Shares of crude-sensitive companies surged on Monday after global oil prices plunged following a framework agreement between the United States and Iran to end the months-long conflict in the Middle East, easing concerns over energy supply disruptions and inflation.

Airline stocks led the gains, with shares of InterGlobe Aviation climbing as much as 4.42% to ₹4,918 apiece, while SpiceJet jumped 8.34% to ₹13.38. By 1:00 pm, IndiGo and SpiceJet were trading 4.04% and 4.86% higher, respectively, outperforming the benchmark Nifty 50, which was up 1.23%.

The rally came after crude oil prices tumbled sharply, providing relief to sectors heavily dependent on fuel and petroleum-based inputs.

Oil Falls Below $85

Brent crude futures declined nearly 5% to around $83 per barrel, while US West Texas Intermediate (WTI) crude dropped about 6% to trade near $80 per barrel.

The decline followed reports that Washington and Tehran had reached a tentative peace framework that could eventually lead to the reopening of the Strait of Hormuz, a critical shipping route that handles more than 20% of global oil and gas trade.

Oil prices had surged to as high as $120 per barrel earlier this year after the closure of the Strait of Hormuz triggered fears of supply shortages.

Airlines, OMCs Gain

Lower crude prices are particularly beneficial for airlines as aviation turbine fuel (ATF) accounts for a significant share of operating costs. Oil marketing companies also witnessed strong buying interest.

Shares of Bharat Petroleum Corporation (BPCL) gained 4.3%, while Hindustan Petroleum Corporation (HPCL) rose 4.4%. Indian Oil Corporation (IOC) advanced 3.4%.

Lower crude prices typically improve fuel marketing margins and reduce working capital pressures for fuel retailers.

Tyre manufacturers also participated in the rally as softer oil prices are expected to reduce raw material costs. Shares of Apollo Tyres rose 2.9%, while JK Tyre & Industries gained 4.6%.

The sector benefits from lower prices of petrochemical-linked inputs, which form a key component of manufacturing costs.

While downstream beneficiaries rallied, upstream oil producers lagged the broader market. Oil India fell 1.5%, while Oil and Natural Gas Corporation (ONGC) declined 0.7%.

Lower crude prices can adversely affect earnings for exploration and production companies as they realise lower prices for their output.

The fall in crude prices also lifted sentiment across equity markets globally, as investors bet that lower energy costs could ease inflationary pressures and reduce the likelihood of prolonged restrictive monetary policies by central banks.

Back home, the Nifty Oil & Gas index gained 1.9%, while most sectoral indices traded in positive territory amid improving risk appetite.