Paint and tyre stocks slide up to 6% as crude oil prices soar on Middle East tension

Berger Paints fell 6% to a day’s low of Rs 582.8, while Asian Paints shares declined by 4.4%. Kansai Nerolac Paints, Akzo Nobel, and Indigo Paints also experienced drops of up to 3%.

Similarly, tyre stocks such as Apollo Tyres, Balkrishna Industries, Ceat, Goodyear, JK Tyre & Industries, and MRF plunged by up to 4%.

The decline in paint and tyre stocks is attributed to rising crude oil prices, as both industries rely heavily on petroleum-based raw materials for production.

Higher crude oil prices generally lead to increased costs for these materials, which can squeeze profit margins and raise concerns among investors about potential declines in profitability.

Meanwhile, oil prices rose amid fears that escalating tensions in the Middle East could disrupt supplies from major producers. Israel and the United States vowed retribution following Iran’s largest-ever direct attack on Israel. With Israel also ordering more soldiers into Lebanon to confront the Iran-backed militant group Hezbollah, the conflict has rapidly intensified, showing little sign of de-escalation despite international pleas.This situation briefly pushed Brent crude above $75 per barrel, while West Texas Intermediate topped $72, with both benchmarks rising nearly 5% over the past three days.

A full-blown war could trigger a significant spike in crude oil prices. India, which imports most of its oil and gas, would be adversely affected by higher prices, impacting inflation and economic growth.

“The situation will change if Israel attacks any oil installations in Iran, which will trigger a huge spike in crude. If it happens, it can turn out to be more damaging for oil importers like India. Therefore, investors should watch the emerging situation very closely,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

In Thursday’s trade, Brent crude futures rose by $1.08, or 1.46%, to $74.98 per barrel as of 12:35 PM IST, while U.S. West Texas Intermediate crude futures increased by $1.10, or 1.58%, to $71.20.

India’s Energy Dependence on the Middle East

Despite India’s rising oil imports from Russia, the country still relies significantly on oil and gas imports from the Middle East.

The share of Russian oil in India’s August imports declined to about 36% after rising for five consecutive months. In July, Russian oil accounted for approximately 44% of India’s oil imports.

Conversely, the share of Middle Eastern oil in India’s August crude imports rose to 44.6% from 40.3% in July. During April to August, the region’s share had decreased to about 44% from roughly 46% a year ago. Iraq, Saudi Arabia, the UAE, and Kuwait remain the primary Middle Eastern suppliers of oil to India.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)