HPCL shares plunged 8.17 per cent to Rs 392.25, while BPCL lost 5.14 per cent to Rs 568.25 on the BSE. IOC tumbled 5.07 per cent to Rs 333.20.
The BSE oil and gas index ended at 11,361.96, down 1.90 per cent.
Higher crude oil prices could increase under-recoveries of oil marketing companies that sell at subsidised rates.
Besides, a surging oil imports bill could pose problems for the economy which Prime Minister Narendra Modi is trying to reboot, said brokers.
"Markets witnessed heavy selling pressure following concerns over higher oil prices. Rising tensions in Iraq is a major reason for this sudden rise in crude oil," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio Ltd.
Surging crude oil prices in global markets hit investor sentiment on concerns that unrest in Iraq could disrupt the country's oil supplies.
Brent crude oil hit a 9-month high near USD 115 a barrel today after militants closed in on Iraq's capital Baghdad.