Nifty Oil And Gas Index Slips As Israel-Iran Conflict Disrupts Oil and Gas Sectors

Tuesday, June 17th: The Nifty Oil and Gas Index slipped and was trading 0.41% or 47.75 points down at ₹11,523.20 at around 12:45 P.M, as the escalating conflict between Israel and Iran continues to wreak havoc on the energy infrastructure of both nations, leading to significant disruptions in oil and gas production and exports.

Iran’s Oil Exports Plunge; Kharg Island Shuts Down

Iran’s crude and condensate oil exports have sharply declined, with recent forecasts suggesting a drastic drop to just 102,000 barrels per day (bpd). This is a significant decrease from the 2025 weekly average of 1.7 million bpd.

Kharg Island, Iran’s primary export terminal, which typically handles over 90% of the country’s oil exports, has been severely disrupted. Satellite tracking data on Monday showed no tankers anchored at the island. While Iran holds approximately 27.5 million barrels in offshore storage, this temporary cushion may not be sufficient to offset prolonged production and supply constraints.

Israeli attacks have targeted the South Pars gas field, a vital resource shared with Qatar, responsible for approximately 80% of Iran’s gas supply. While the full extent of the damage remains unclear, any disruption to its daily output of 610 million cubic meters of gas and 700,000 barrels of condensate could be devastating for Iran’s domestic gas supply and its crucial petrochemical industry. The Persian Gulf Star condensate refinery, Iran’s largest, is particularly vulnerable to disruptions at South Pars.

Israel Curtails Gas Production, Refineries Damaged

Israel was forced to shut down two of its three offshore gas fields, Leviathan (capacity of 1.2 billion cubic feet per day) and Karish (capacity of up to 8 billion cubic meters per year or 775 million cubic feet per day), resulting in a nearly two-thirds reduction in its natural gas supply. The remaining Tamar field (with a capacity of 1.1 billion cubic feet per day) is operational, but Israel has resorted to relying on coal and fuel oil for power generation.

The disruptions have extended beyond Israel, impacting neighbouring countries. Egypt, which relies on Israeli gas for 15-20% of its consumption, saw its fertiliser producers halt operations on Friday.

Israel’s ORL oil refinery in Haifa ceased all operations after sustaining significant damage from an Iranian missile strike targeting its power generation facilities. Reports from the Bazan Group, which operates the refinery, confirmed that the power plant had been significantly damaged, resulting in the shutdown of all refinery facilities.

Strait of Hormuz in Focus

Global markets are closely watching the Strait of Hormuz a vital chokepoint through which nearly a fifth of the world’s oil and a significant volume of LNG pass. Although the waterway remains operational, any disruption here could trigger a significant increase in global energy prices.

Oil Prices Spike, Then Ease

In immediate reaction to the conflict, Brent crude prices surged by 7 per cent to above $74 per barrel. However, they eased slightly as hopes for ceasefire mediation emerged and neither side targeted the most critical global infrastructure yet.

Outlook Remains Uncertain

With the conflict showing no immediate signs of de-escalation, the energy sector is bracing for further negative effects. If the conflict intensifies or disrupts international transit routes, such as the Strait of Hormuz, the global oil and gas market could face even more severe shocks. The situation remains highly cautious, directly impacting indices like the Nifty Oil & Gas.

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