Open your brokerage app on a morning when Tehran and Washington are trading fresh threats, and the same pattern shows up before you have even had your coffee. ONGC and Oil India are trading green. IOC, BPCL and HPCL are red. The rupee has slipped a touch, and somewhere on the news ticker, Brent crude has moved three or four per cent overnight. This is not a coincidence, and it is not new. Since the Iran-US conflict turned into an open military exchange in February 2026, oil and gas stocks on the NSE and BSE have become one of the clearest, most tradeable proxies for how this war is actually going. What is worth understanding properly is why some of these stocks rise on what looks like terrible news while others fall on the same headline, and what that split actually means for a portfolio sitting in India right now.

How We Got Here, in Brief

The conflict began in late February 2026 with coordinated US and Israeli strikes on Iranian nuclear and military sites, and Tehran's retaliation against US bases across the Gulf turned this from a regional flashpoint into a direct war. Within days, Brent crude had jumped more than 20 per cent as traders priced in the worst case for the Strait of Hormuz, the narrow waterway off Oman through which close to a fifth of the world's oil, and a large share of its LNG, normally passes. We tracked that first big scare when the Nifty slipped below 24,000 as oil spiked toward $73 a barrel, and looking back, that turned out to be only the opening chapter of a much longer story.

What has followed since has been less a single crisis and more a rolling one. An April ceasefire briefly reopened the strait, and a US-Iran memorandum of understanding in June pulled Brent down to a multi-month low near $69 in early July. That calm did not last. The deal collapsed over disagreements on which shipping routes tankers could use, attacks on vessels resumed, and crude spiked back past $105 by late July. By mid-August, a vessel struck near Hormuz sent Brent above $91, a move we covered in detail in our piece on the $91 crude spike and what it meant for OMC stocks and your portfolio. By the last week of August, prices had eased back toward the high $80s as Iran and Oman discussed a fresh shipping arrangement, though nobody trading this theme is treating that as a done deal just yet.

The chart below lays out that entire rollercoaster in one place.

Every one of those swings shows up almost immediately in oil and gas counters on Dalal Street, though not in the direction you might assume for every stock in the basket.

Oil and Gas Is Not One Trade

The single biggest mistake retail investors make with this theme is treating oil and gas stocks as one basket that moves together. It does not, and understanding why is really the whole story here. Crude oil is a raw material for some of these companies and a product they sell for others, and that distinction decides whether a spike in Brent is good news or bad news for a specific stock. Upstream producers such as ONGC and Oil India pump crude out of the ground and sell it, so a higher price genuinely means fatter realisations and better profits. Downstream companies such as IOC, BPCL and HPCL buy that same expensive crude as their key input, refine it, and sell petrol and diesel at prices that are only partially and slowly adjusted. When crude rises faster than pump prices, their marketing margins get squeezed, sometimes badly enough to post an actual quarterly loss. Gas focused companies sit somewhere in between, less exposed to crude directly but very exposed to anything that disrupts shipping through Hormuz, since a meaningful share of India's LNG also transits that same waterway.

Reliance Industries is the trickiest one to slot into a simple table, since it runs upstream, downstream, retail and telecom businesses all at once. Its refining and marketing arm feels the same crude cost pressure as a pure OMC, but that pressure gets diluted across a much bigger, more diversified balance sheet, which is why Reliance tends to move less violently on any single Hormuz headline than a pure play OMC does.

The Stock Scoreboard: Winners and Losers

Run the actual numbers and the split becomes obvious. From the start of this year through the first week of July, HPCL had fallen around 22 per cent and BPCL around 21 per cent, with IOC down about 17 per cent, compared with a much smaller 8.9 per cent decline in the Sensex over the same period. ONGC and Oil India, meanwhile, had actually gained, rising as much as 4 per cent even as the broader market and their downstream cousins struggled. That gap is not small, and it tells you plainly which side of the crude trade the market believes is winning.

It would be neat if upstream stocks simply captured every rupee of higher crude prices as pure profit, but the government's windfall tax complicates that picture. Reintroduced in late March as the war intensified, this export duty on crude, petrol, diesel and ATF is revised every fortnight based on prevailing prices, and it has swung almost as sharply as crude itself. Diesel export duty, for instance, jumped from Rs. 15.5 to Rs. 25.5 a litre in early August as crude climbed, then eased back to Rs. 24 a litre by the middle of the month as prices cooled slightly. For ONGC and Oil India, this tax skims off a meaningful part of the windfall from higher realisations, which is one reason their share price gains have lagged what a naive read of rising crude prices might suggest.

For OMC shareholders, the picture is messier still. IOC alone posted a net loss of roughly Rs. 2,662 crore in the first quarter of FY26 and has pushed its total borrowings to close to Rs. 20,000 crore rather than pass the full crude spike on to consumers at the pump, partly to keep retail fuel inflation in check. Petrol in Delhi was still retailing near Rs. 102.12 a litre as of end July, so a chunk of this cost is being absorbed on the balance sheet rather than at the pump, and that matters if you are holding these stocks purely for their historically generous dividend yield, a theme we have explored in our broader guide to dividend yield stocks in India. Volatility of this scale is also exactly the kind of environment where sizing individual positions sensibly matters more than usual, something the 3-5-7 rule of money management is specifically built for.

The Gas Side Nobody Is Watching Closely Enough

Oil gets most of the headlines, but the LNG story running underneath this conflict deserves just as much attention, particularly for anyone holding Petronet LNG, GAIL or city gas distributors like IGL and MGL. India imports around 27 million tonnes of LNG a year, roughly half its total gas consumption, and the bulk of that comes from Qatar. When Iranian strikes hit QatarEnergy's Ras Laffan facility, the world's largest LNG production complex, early in the conflict, Petronet was forced to invoke force majeure on its shipments and its stock fell sharply on the news. GAIL and IOC responded by cutting industrial gas supplies by anywhere between 10 and 40 per cent, though CNG for vehicles and piped gas for households were largely protected through the disruption. The story flipped in the other direction come mid-June, when Qatar announced a rapid restart of Ras Laffan production alongside the short-lived US-Iran memorandum of understanding, and Petronet and GAIL shares both moved higher on the news. That back and forth is a useful reminder that gas stocks in this conflict are trading less on crude oil prices directly and more on the physical state of shipping through Hormuz at any given moment.

It Is Not Just Oil Stocks: The Rupee and Rate Story

The ripple effects go well beyond the energy sector itself. India imports more than 85 per cent of its crude requirement, and JM Financial estimates that every one dollar rise in crude adds roughly two billion dollars, close to Rs. 18,000 to 19,000 crore, to the country's annual import bill. That extra dollar demand is a big part of why the rupee weakened to around 95.68 against the dollar in mid-August, a dynamic we unpacked separately in our piece on rupee pressure during an earlier oil spike this year. India Ratings now expects the rupee to average closer to Rs. 93.98 against the dollar through FY27, and notes that the Indian crude oil basket actually averaged over $96 a barrel between April and July, well above the $85 assumption baked into that forecast, a gap that leaves real downside risk if crude does not cooperate.

That same crude and currency pressure is feeding into how the RBI is thinking about interest rates. The central bank held its repo rate at 5.25 per cent on August 5 for a fourth straight meeting, but the minutes released two weeks later carried a noticeably more hawkish tone, with inflation now seen peaking near 5.9 per cent in the third quarter of FY27, a shift we covered in detail in our piece on the RBI's hawkish turn and a possible Q3 rate hike. Put the growth and inflation pictures together and it is easy to see why India Ratings recently trimmed its FY27 GDP growth forecast even after lowering its own crude price assumption, something we broke down fully in what is actually driving that growth downgrade. None of these threads, the rupee, interest rates, or GDP growth, are moving independently of what is happening in the Gulf right now.

What Actually Moves This From Here

The next real catalyst is not another headline about missiles or ceasefires, it is whether Iran and Oman can actually finalise a shipping arrangement through Hormuz that both Tehran and Washington are willing to live with. Iranian President Masoud Pezeshkian signalled in late August that Tehran wants this war to end soon, and that kind of political language usually moves markets faster than the underlying diplomacy actually does, so expect crude, the rupee and this entire basket of stocks to keep reacting to statements as much as to actual barrels of oil. Foreign investor flows into Indian bonds and equities are worth tracking alongside this, since FPI activity in Indian debt tends to shift quickly whenever the oil and currency outlook changes. Watch the fortnightly windfall tax revision, watch whether OMCs are finally forced into a real pump price hike if crude holds above 90 dollars for another month, and watch how many vessels are actually transiting Hormuz on any given week rather than how many barrels analysts think should be flowing through it. Those numbers, not the day's headline, are what will actually decide how this basket of stocks trades from here.

Frequently Asked Questions (FAQ)

1. Why do ONGC and Oil India shares rise when crude oil prices go up while IOC, BPCL and HPCL fall?

ONGC and Oil India are upstream producers who sell crude oil, so higher prices mean better realisations. IOC, BPCL and HPCL are downstream refiners who buy that same expensive crude and sell fuel at slower-moving pump prices, so their margins get squeezed instead.

2. What is the Strait of Hormuz and why does it matter for Indian oil and gas stocks?

The Strait of Hormuz is a narrow waterway off Oman through which close to a fifth of the world's oil and a large share of its LNG normally passes. Disruptions there directly affect crude supply and shipping, which is why Indian oil, gas and even rupee movements track Hormuz headlines closely.

3. How does rising crude oil affect the Indian rupee?

India imports over 85 per cent of its crude requirement, so higher oil prices mean more dollar demand to pay for imports. This extra demand tends to weaken the rupee and often prompts RBI intervention to manage the pace of the decline.

4. What is the windfall tax and how does it affect ONGC and Oil India?

The windfall tax is an export duty on crude, petrol, diesel and ATF, revised every fortnight based on prevailing prices. It reduces some of the extra profit that upstream producers like ONGC and Oil India would otherwise capture from higher crude realisations.

5. Are Petronet LNG and GAIL affected by the Iran-US conflict too?

Yes. Both companies depend on LNG shipments that can transit near Hormuz, and Qatar supplies the bulk of India's LNG. Disruptions to Qatari facilities or Hormuz shipping have triggered force majeure notices and supply cuts in the past during this conflict.

6. Will Indian petrol and diesel prices increase because of this conflict?

Not immediately in most cases. OMCs have largely been absorbing higher crude costs through borrowing rather than fully hiking pump prices, but a sustained crude spike above $90 a barrel makes a future price hike more likely.