Oil price-sensitive stocks slide: airlines, tyres, paints under pressure

Shares of airline, tyre and paint companies fell up to 8 per cent on Monday as crude oil prices surged past $110 per barrel amid escalating tensions in West Asia, triggering a sell-off in oil-sensitive sectors.

In airline stocks, InterGlobe Aviation and SpiceJet fell as much as 8.3 per cent and 8.2 per cent, respectively. As of 9:50 AM, the shares were down 7.5 per cent and 5.4 per cent, compared with a 2.8 per cent decline in the Nifty 50 index.

Among paint stocks, Asian Paints fell 5 per cent, Berger Paints slipped 4.3 per cent, and Indigo Paints declined 5.6 per cent. In tyre stocks, JK Tyre and Industries dropped 8.2 per cent, Apollo Tyres fell 4.9 per cent, Tolins Tyres declined 4.5 per cent, and MRF was down 3 per cent.

The stocks saw selling pressure as Brent crude oil prices rose to their highest level since 2022. Crude oil prices form one of the biggest cost components in these industries. However, analysts expect the airlines to likely pass on a partial increase to customers. Brent crude rose as much as 28.9 per cent to $119.5. West Texas Intermediate, the light, sweet crude oil produced in the US, was trading at $113.4 a barrel, up 24.7 per cent from Friday's close. READ | BPCL, HCPL, IOC sink up to 8% as oil prices soar past $110/barrel

Global oil prices have surged since Israel and the US attacked Iran on March 1, unsettling financial markets and raising concerns of inflation. The increases followed the US crude price jumping by 35 per cent and Brent crude rising by 28 per cent last week. So far this year, WTI and Brent crude oil prices rose 98 per cent and 88 per cent.

Iraq, Kuwait and the UAE have cut their oil production as storage tanks fill due to the reduced ability to export crude, according to news reports. Iran, Israel and the US also have attacked oil and gas facilities since the war started, exacerbating supply concerns.

JM Financial, in an earlier report, said escalation of conflict in the West Asia presents a near-term negative for IndiGo, driven by disruption to Gulf airspace and potential operational constraints at Dubai - a critical global transit hub - which could temporarily reduce international ASKs, depress connectivity traffic, and lower aircraft utilization. "Concurrently, a geopolitical spike in crude oil prices poses margin risk given IndiGo’s high fuel cost sensitivity and limited hedging," the brokerage said.

JM Financial estimates that the closure of the Strait of Hormuz and potential disruptions to travel via the Red Sea could flare up freight rates and increase the timeline uncertainty of cargo transport via these routes.

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