The ongoing conflict in the West Asia has kept global energy markets on edge, pushing crude oil, LNG, and freight rates sharply higher. A recent CLSA report titled “If the war were to end tomorrow…” explains that even a sudden de-escalation could trigger immediate reactions across commodities, stocks, and global markets. However, the report also cautions that the long-term impact may be very different from the initial market response. Here are five things that could happen quickly if the war ends.
1. Crude oil and LNG prices may fall sharply at first
One of the most immediate reactions to any ceasefire or reopening of the Strait of Hormuz would be a pullback in crude oil and LNG prices. During the conflict, supply fears pushed energy prices higher, and any sign of normal shipping activity could lead to quick profit-booking in commodities. Tanker freight rates, which surged during the war, may also cool off rapidly.
2. Oil and gas stocks could see a relief rally
Indian oil and gas stocks have seen volatility during the conflict, with oil marketing companies and gas firms correcting due to fears of higher input costs. If tensions ease, stocks such as IOC, BPCL, HPCL, GAIL, and Petronet LNG may see a short-term rebound as crude prices stabilise. Markets often react quickly to geopolitical headlines, and the initial move could be positive for downstream companies.
3. Energy prices may remain higher than before the war
Despite the possibility of an immediate price correction, the report says crude and LNG prices may not return to pre-war levels. Supply disruptions in the Gulf, damage to infrastructure, and delays in restarting production could keep global energy markets tight for months. Countries may also increase strategic reserves after the conflict, which could support demand and keep prices elevated.
4. Upstream companies may benefit more than refiners
If crude prices stay high even after the war, upstream companies such as ONGC, Oil India, and Reliance Industries may benefit more than oil marketing companies. Higher crude prices improve realisations for producers, but refiners and fuel retailers may struggle if retail fuel prices are not increased in line with global costs. This could lead to pressure on marketing margins for companies like IOC, BPCL, and HPCL.
5. LNG market tightness could last longer than expected
Before the conflict, many analysts expected the global LNG market to move into oversupply by late 2026 due to new capacity additions, especially from Qatar. However, the war has damaged key facilities and delayed projects, which could push the oversupply cycle to 2027 or later. This means gas prices may stay firm even if hostilities end quickly.
Bottom line
While the end of the war could trigger an immediate relief rally across global markets, analysts say the bigger impact will be structural changes in energy supply. Even if crude and LNG prices correct in the short term, supply disruptions, delayed production restart, and higher demand for energy security could keep global oil and gas prices elevated for a longer period than earlier expected.
