Even if the ongoing West Asia conflict ends now, the shock to global energy markets is likely to persist, with crude oil and LNG prices expected to remain 15–25% above pre-war levels, signalling a structural reset that could reshape India’s energy landscape, according to a CLSA report.
“Post-war crude and LNG price may settle at 15-25% higher than pre-war,” CLSA said, underlining that the conflict has “fundamentally changed the demand-supply equation for the next few quarters.”
West Asia tensions jolt energy markets
The assessment comes amid a sharp spike in energy markets triggered by disruptions in West Asia, with crude, LNG and tanker freight witnessing the “most dramatic spike” since hostilities began, as supply chains across key routes such as the Strait of Hormuz remain under strain.
While a ceasefire or reopening of Hormuz could offer temporary relief, CLSA warned that any correction may be short-lived. “These may see big pullbacks as an immediate reaction to any notable de-escalation,” the report said, adding that the broader supply constraints would keep prices elevated.
At the heart of this shift is a tightening supply outlook. Restarting production in Gulf countries could take “a few months with uncertainty,” with risks of permanent loss in production levels of some wells, the report noted.
At the same time, demand is expected to rise as countries rebuild inventories and prioritise energy security. CLSA said a “rising focus on energy security as well as depleting strategic inventory” could push demand beyond earlier expectations.
The LNG market, already sensitive to disruptions, faces a longer road to recovery. Earlier projections of a global oversupply by late 2026 are now likely to be delayed. “Likely delay in this new capacity may delay this over-supply argument to 2027,” CLSA said, pointing to setbacks in new capacity additions, particularly from Qatar.
The scale of disruption is significant. The Ras Laffan complex in Qatar — accounting for around 20% of global LNG supply — has been impacted, highlighting the vulnerability of global gas markets to geopolitical shocks.
For India, the implications are sharply differentiated across the energy value chain.
Upstream companies such as ONGC and Oil India are positioned to benefit from elevated crude prices. CLSA said that at Brent crude levels of around $90 per barrel, ONGC could see significant upside, making it a preferred pick in the sector.
In contrast, oil marketing companies (IOC, BPCL, HPCL) face margin pressure. The report highlighted that the break-even crude price for auto fuels is around $75–80 per barrel, suggesting limited headroom for profitability if crude remains elevated.
OMCs face earnings squeeze
“OMCs may struggle to make reasonable marketing margins,” CLSA said, especially as retail fuel prices remain unchanged, forcing companies to absorb higher input costs after a period of strong earnings.
Gas and LNG companies may also see sentiment weaken. With the expected global LNG surplus pushed out, CLSA said investor interest in GAIL, Petronet LNG and Gujarat Gas could fall, citing a lack of near-term triggers.
Overall, the report signals a decisive break from the pre-war energy landscape. CLSA said the conflict has “fundamentally changed the trading set-up versus pre-war period,” ushering in a phase of structurally higher prices, delayed supply normalisation and increased volatility in global energy markets.
For India, the shift points to a more complex energy environment ahead — marked by tighter supply, elevated costs and heightened sensitivity to geopolitical risks, even after the conflict subsides.