Global oil markets are feeling the heat as tensions between Israel and Iran escalate. Over the weekend, retaliatory attacks continued for a fourth day, with Iran rejecting a ceasefire.
The conflict intensified after Israel reportedly targeted Iran's South Pars gas field, a major energy source.
While damage to gas infrastructure is a concern, the bigger worry for global oil supply is the potential disruption of the Strait of Hormuz. This narrow waterway is crucial, as about 20% of the world's oil passes through it daily. Any move by Iran to block access could send oil prices soaring.
Note: The prices are as of 9:16 AM.
The decorative paint business is heavily reliant on petroleum-based raw materials. When crude oil prices rise, the costs of essential ingredients, including titanium dioxide, also increase. These raw materials account for a significant 55-60% of the total cost of producing paint, making it harder for them to achieve good profit margins.
Brent crude oil is a major source for synthetic rubber and other petrochemical products. As crude prices climb, the cost of raw materials for the rubber industry goes up, thereby increasing production costs for tire companies. Conversely, lower raw material costs allow tire manufacturers to enjoy better profit margins.
Over the past year, the shares of major Indian paint companies have shown mixed results. Asian Paints' share price has dropped by about 24%, while Kansai Nerolac shares have fallen by 13%.
Berger Paints, however, has performed slightly better, with its shares rising 13% during the same period. In comparison, the broader Nifty 50 index has seen a 5% increase in the past year.
Read more: Stocks to Watch on June 16, 2025: SpiceJet, Bajaj Finance, ITC and More in Focus.
The ongoing conflict in the Middle East poses a significant threat to global oil supply and, consequently, to industries that depend heavily on petroleum-based raw materials. Both the decorative paint and tire sectors will be directly impacted by rising crude oil prices, which can squeeze their profit margins.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.
Published on: Jun 16, 2025, 9:28 AM IST
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