Nomura said refining remains the best way to play the ongoing Middle East crisis, naming Reliance Industries as its top pick due to expected gains from stronger refining margins, while GAIL is seen as the least impacted among gas companies under its coverage.

The brokerage has given Reliance Industries a buy rating and increased its target price by 22 percent to Rs 1,700. GAIL has also been assigned a buy rating, with its target price raised by 43 percent to Rs 203 per share. Petronet LNG and Mahanagar Gas have been given buy ratings, with target prices increased by 31 percent and 49 percent, respectively. Among oil marketing companies, HPCL, BPCL and IOCL have buy ratings with target prices raised by 55 percent, 51 percent and 28 percent, respectively.

The brokerage noted that since the conflict in Iran escalated, cracks for diesel and aviation turbine fuel have surged to around $76 per barrel and $107 per barrel, respectively, compared with a normal range of $15 to $20 per barrel in recent quarters. The increase has been driven by refinery disruptions due to crude shortages and attacks, supply blockages through the Strait of Hormuz, China’s export restrictions on refined products, airline hedging and higher war-related consumption.

Nomura said Indian refiners with higher diesel exposure are likely to benefit from elevated cracks. Among stocks under its coverage, Reliance Industries is expected to benefit due to its limited exposure to fuel retailing, with less than 10 percent of refinery throughput linked to retail. In contrast, oil marketing companies are likely to face losses on petrol and diesel retailing that could offset gains from refining. The brokerage estimates that every $1 per barrel increase in refinery margins could lead to about a 2.3 percent rise in Reliance’s consolidated EBITDA.

In the gas segment, Nomura prefers GAIL, citing its tariff-based business model that limits the impact of gas price volatility, along with a 12 percent tariff increase effective January 2026. While imported LNG volumes may decline, the impact is expected to be partially offset by domestic gas volumes. The company may also see some upside in its marketing segment and LPG production.

Petronet LNG may see a volume impact of up to 40 percent following supply disruptions linked to Qatar Energy’s force majeure, though margins are expected to remain stable due to a 5 percent annual tariff escalation from January 2026.

Nomura said sustained crude oil prices above $100 per barrel could pressure oil marketing companies’ financials, with estimated cumulative annual losses in fuel retailing exceeding $60 billion at current prices. If crude remains above $100 per barrel, the brokerage sees a case for reintroducing windfall tax on domestic producers such as ONGC and Oil India. At this level, it estimates a windfall tax equivalent of $25 per barrel could generate about Rs 506 billion in additional revenue, which could be used to provide partial relief to oil marketing companies through excise duty cuts of around Rs 3 per litre on petrol and diesel.