Global brokerage UBS has downgraded shares of India’s major oil marketing companies (OMCs) after global crude oil prices surged past $100 per barrel amid escalating tensions in West Asia.
The brokerage downgraded Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Limited (BPCL) to a “neutral” rating, while Hindustan Petroleum Corporation Limited (HPCL) was downgraded to “sell.”
According to UBS, the sharp rise in crude oil prices, driven partly by the ongoing geopolitical conflict between Israel and Iran, could put pressure on the profitability of state-run OMCs.
Brent crude prices crossed the $100 per barrel mark for the first time in more than three years, touching around $116 per barrel for the April 2026 futures contract. Data shows that prices have surged nearly 71 percent in the last month, rising from about $68 per barrel.
UBS analysts Rwibhu Aon and Yash Bohra said the current rally in crude prices and refining margins resembles the oil market disruption seen in 2022.
The brokerage noted that the integrated margins of Indian OMCs—which combine refining and fuel marketing businesses—are negatively impacted when crude prices rise sharply. This is largely due to limited flexibility in adjusting retail fuel prices in India and the impact of rupee depreciation, with the USD–INR rate now around 92 compared with 79 in 2022.
UBS has cut its marketing margin estimates for FY27 and FY28 by 43–45 percent and 22–26 percent, respectively, although it raised gross refining margin forecasts by 30–48 percent for the same period.
Due to the shift in profitability from fuel marketing to refining, UBS expects a sharp decline in earnings for the companies. The brokerage has reduced its FY27 profit-after-tax estimates by 19 percent for IOC, 15 percent for BPCL, and 46 percent for HPCL.
Following the downgrade, OMC stocks witnessed sharp declines in the market. The S&P BSE Sensex fell around 2.8 per cent during intraday trading, while the BSE Oil and Gas index slipped nearly 3 per cent. Shares of IOC, BPCL, and HPCL dropped as much as 8 percent during the session.
Retail fuel prices in India have remained largely unchanged since May 2022 despite fluctuations in global oil prices. UBS believes any hike in petrol and diesel prices or excise duty adjustments may only provide temporary relief to OMCs.
However, the brokerage expects some support from the recent increase in LPG prices, with the price of a cylinder rising by ₹60.
To reflect uncertainty in the earnings outlook, UBS has lowered its target price-to-earnings multiples for the three companies and reduced their price targets. The revised targets stand at ₹175 for IOC, ₹365 for BPCL, and ₹340 for HPCL.
Analysts also warned that prolonged disruptions in global oil supply or further attacks on energy infrastructure could push crude prices even higher, increasing financial pressure on oil marketing companies.
UBS downgrades IOC, BPCL, HPCL as crude oil surge past $100, raising margin concerns
