West Asia Crisis Impact: The Indian Oil marketing companies are witnessing significant pressure amid ongoing energy supply constraints due to the ongoing war between the US and Iran in the Middle East. According to a report, companies are selling petrol at a loss of Rs 14 per litre and diesel at a loss of Rs 18 per litre as crude oil prices are higher than the fixed retail fuel prices reducing marketing profits.

Supply disruptions in the Strait of Hormuz, which handles about 20 per cent of global oil and liquefied natural gas (LNG) trade, have reduced the availability of fuels, fertilisers and chemicals, pushing up prices and increasing cost pressures on lower-end industries, ratings agency Icra said.

Gas And Fertiliser

In addition to petrol and diesel losses, high energy prices in the wake of the West Asian crisis are expected to yield only Rs 80,000 crore in revenue from LPG to companies this fiscal. Meanwhile, fertiliser subsidies are expected to rise to Rs 2.05-2.25 lakh crore.

Before the West Asian crisis broke out two months ago, crude oil prices were at US$70-72 per barrel.

"The stable pump prices for auto fuels amid elevated crude oil prices are impacting the profitability of the oil marketing companies (OMCs)," said Prashant Vasisht, Senior Vice President and Co-Group Head, Icra.

"At crude prices of USD 120-125 per barrel, marketing margins on petrol and diesel are estimated to be negative Rs 14 a litre and Rs 18 per litre, respectively."

If current trends continue, ICRA estimates that the loss in LPG collection will touch Rs 80,000 crore by FY27. Meanwhile, the subsidy burden on fertilisers is expected to rise to Rs 2.05-2.25 lakh crore, higher than the Rs 1.71 lakh crore allocated in the budget.

Higher raw material and energy prices are expected to impact profitability in oil marketing, fertilisers, chemicals and city gas distribution sectors. Therefore, the ability to fully pass on these higher costs to the end consumer is limited.

"Overall, Icra's outlook on the crude oil refining segment remains stable...while the outlook on the fuel retailing, fertiliser, basic chemicals and petrochemical sectors remains negative," Vasisht added.

Margin Pressure

ICRA expects the pressure on profit margins and creditworthiness to be short-term and will only ease once geopolitical tensions ease and global supply chains return to normal.

The fertiliser sector has also faced severe cost increases due to rising sulfur and ammonia prices and rising natural gas prices.

Urea pool prices rose from US$13 per million British thermal units before the crisis to around US$19 in April 2026.

"Significant raw material price inflation coupled with inadequate subsidy revision is set to moderate the profitability of the P&K fertiliser players," Vasisht said, adding that weather risks could further limit farmers' ability to absorb price hikes.

Chemical and polymer prices have risen sharply due to trade barriers and rising fuel costs. This has prompted manufacturers and consumers to hoard inventory.

However, ICRA expects demand to return to normal once inventory levels come down, especially in segments affected by global oversupply.

ICRA says urban gas distributors are facing margin pressure due to rising gas prices and currency depreciation. While the profitability of pipeline natural gas (PNG) to households is expected to remain relatively stable due to preferential gas allocation, the profitability of compressed natural gas (CNG) is expected to weaken as cost increases are only partially passed on to consumers.

(With Unputs From Agencies)