Reliance Industries Poised for Margin Boost Amid Hormuz Crisis

Introduction: Geopolitical Tailwinds for RIL

Motilal Oswal Financial Services has reiterated a 'Buy' rating on Reliance Industries (RIL), projecting a significant upside for its refining and petrochemical margins. The brokerage anticipates that escalating geopolitical tensions surrounding the Strait of Hormuz (SoH) will tighten global energy markets, directly benefiting RIL's Oil-to-Chemicals (O2C) division. The firm has set a target price of ₹1,750 for the stock, suggesting that if current supply disruptions continue through the first half of FY27, RIL's consolidated EBITDA could see an 8.5% upside, potentially pushing its fair value to ₹1,846 per share.

The Strait of Hormuz: A Critical Chokepoint

The Strait of Hormuz is a vital artery for the global energy market, responsible for the transit of approximately 20% of the world's oil and liquefied natural gas (LNG) supply. Recent events, including a potential blockade and regional instability, have severely disrupted this flow. The situation is compounded by refinery outages in West Asia and reports of Chinese export restrictions on gasoline and gasoil. This confluence of factors has created a severe supply squeeze, causing a dramatic surge in prices for refined petroleum products.

Soaring Product Cracks and Petrochemical Prices

The market has responded swiftly to the supply tightness. According to Motilal Oswal, product cracks for gasoil and jet fuel have soared to 147% and 124% above their long-term averages, respectively. In March 2026 alone, gasoil, gasoline, and jet fuel cracks have climbed to $12, $16, and $18 per barrel. The impact is also visible in the petrochemical sector, where polyethylene (PE) and paraxylene (PX) prices have increased by 10–15% month-on-month. The brokerage believes that even if tensions de-escalate, the normalization of supply chains will lag, keeping RIL's O2C margins elevated in the near term.

Impact on RIL's O2C EBITDA

Reliance Industries is uniquely positioned to capitalize on this market volatility. Drawing a parallel to the 2022 Russia-Ukraine conflict, Motilal Oswal noted that RIL’s O2C EBITDA grew by 30% year-on-year in FY23, adjusted for export duties. In the current scenario, if product cracks sustain at $1–$15 per barrel above historical averages, RIL’s O2C EBITDA could increase by an estimated $170 million. Furthermore, RIL's diversified feedstock mix, with naphtha accounting for only 30%, provides a cushion against crude-linked cost pressures that often affect standalone petrochemical producers.

Valuation and Sum-of-the-Parts Analysis

Motilal Oswal's valuation of RIL is based on a sum-of-the-parts (SOTP) approach. The brokerage values the O2C and exploration and production (E&P) segments at 7.5x and 5.0x FY28E EV/Ebitda, respectively. The target price of ₹1,750 is derived by assigning specific equity values to RIL’s various businesses:

• Jio Platforms: ₹590 per share
• Reliance Retail: ₹560 per share
• New Energy: ₹174 per share

This detailed valuation underscores the diversified strength of RIL's portfolio, with the O2C business currently acting as a powerful driver of profitability.

Key Global Supply Disruptions

The current market tightness is driven by several interconnected factors that are reshaping global energy flows. These disruptions create a challenging environment for consumers but present opportunities for well-positioned refiners like RIL.

Rerouting and Strategic Response

In response to the shifting market dynamics, RIL has demonstrated operational agility. Two tankers loaded with fuel from its Jamnagar refinery, initially bound for Europe, have been rerouted to Asia. This move allows the company to capitalize on record-high refining margins in Asia, particularly for jet fuel in Singapore, as regional buyers scramble to secure supplies amid production cuts and reduced Middle East exports.

A Key Risk: Government Intervention

The primary risk to this bullish outlook is the potential for government intervention. If refining margins become excessively high, the Indian government could reintroduce export duties on fuels, similar to the Special Additional Excise Duty (SAED) imposed in July 2022. Such a measure would cap the profitability of fuel exports and limit the potential upside to RIL's O2C earnings.

Conclusion: A Favorable but Volatile Outlook

Reliance Industries appears well-positioned to benefit from the ongoing tightness in global energy markets. Its complex refining operations, diversified feedstock, and strategic market access provide a significant advantage. While the O2C segment is set to drive earnings growth, the overall situation remains fluid, hinging on geopolitical developments in the Middle East and the policy responses of governments worldwide. Investors will be closely watching for any signs of de-escalation or the imposition of duties that could alter the current favorable margin environment.