A $90 Horizon? The True Value of Middle Eastern Risks and the Indian Oil Business

1. Introduction: The Market's Tense 72 Hours

On the night of June 19, the Israeli military conducted a precision airstrike on a nuclear-related facility in southern Iran, prompting Iran to retaliate with ballistic missiles and drones. Following this, Brent futures surged by $11 from $66 to $77 in just three trading days. Many experts highlight that the quantitative impact is greater than during the Russia-Ukraine crisis, but ICICI Securities' Probal Sen states, "At the current $75-$77 range, Indian Oil Marketing Companies (OMCs) still have resilience."ndtvprofit.com

2. The Formula of Rising Crude: $1 = 0.53 Rupees

Since domestic retail prices tend to be maintained by government leadership, OMCs see their profits eroded by the equation "Crude rises by $1 → Retail margin shrinks by 0.53 Rupees." In April-May, there was a margin of over 10 Rupees per liter, but the recent surge reduced it to about 6 Rupees. Although still higher than the historical average (3-4 Rupees), analysts warn that if prices stabilize above $90, it will shift from a "momentary gust" to "constant pressure."ndtvprofit.comeconomictimes.indiatimes.com

3. Government's Guard: Reserves and Diversification

Petroleum Minister Hardeep Singh Puri emphasized, "We have several weeks' worth of reserves, and our import sources are diversified to include Brazil and Guyana... no need to worry." In reality, Russia accounts for about 39% of imports, and dependency on the Middle East has significantly decreased compared to a decade ago. Even in a Strait of Hormuz blockade scenario, the government's official stance is that it can be managed with "diverted transportation + increased shale production from the US and Canada."ndtv.compsuwatch.com

4. Market Thermometer: Stocks and the Rupee

On June 13, the day after the Israeli airstrike, IOC and BPCL stocks plummeted by 6%. In the foreign exchange market, the Rupee hit a three-month low. However, five trading days later, as crude eased to the $74 range, OMC stocks rebounded by 2%, though volatility remains high.economictimes.indiatimes.commoneycontrol.com

5. SNS Listening: Capturing the Unheard Voices

(*Each post is a summary of public data from June 15-20)twitter.comtwitter.comfacebook.com

6. Historical Comparison: Differences with the Gulf War and Arab Spring

During the 1990 Gulf War, crude oil prices doubled 2.3 times in three months, and the OMC fell into deficit due to government price controls. During the 2011 Arab Spring, even with a $12 increase per barrel, product price hikes followed, keeping the deficit limited. This time, the presence of ① discounted Russian crude, ② strengthened Indian reserves, and ③ tax potential due to the spread of digital payments are evaluated as providing a "fiscal cushion."

7. Perspective of International Finance

Citibank estimates that a reduction of 1 million bpd in Iranian exports would lead to $75-$78, and a reduction of 2 million bpd would lead to $95, updating the fluctuation range. If Brent surpasses $90, the global CPI could rise by 0.3-0.4% points, narrowing the RBI's (Reserve Bank of India) room for easing.finance.yahoo.com

8. The Paradox of Energy Transition

Ironically, the expansion of renewable energy is weakening the supply-side flexibility due to insufficient investment in fossil fuels. Unless OPEC Plus changes its stance on production cuts, the price impact of geopolitical shocks will become more sensitive than before. India needs to accelerate its green hydrogen and biofuel policies while being prepared for the "dual costs of transition."

9. Future Scenarios

(Author's Estimate)

10. Conclusion

The Israel-Iran conflict presents a dual challenge of "price premium" and "supply risk," but the OMC's "ironclad margin" still retains some leeway. However, if prices exceed $90 for several months, the revival of subsidies and acceleration of renewable energy will become urgent. Investors should focus more on policy reactions and long-term decarbonization investment plans than short-term stock price fluctuations.