Auto stocks hit the brakes as US-Iran tensions drive crude higher

The Nifty Auto index dropped 3.24% to 27,567.55 on Wednesday as a renewed surge in crude oil prices following an escalation in US-Iran tensions weighed on sentiment.

Hero MotoCorp was the biggest loser in the index, falling 6.81%, followed by Eicher Motors (-4.84%), Bosch (-3.99%), Sona BLW Precision Forgings (-3.40%), Bajaj Auto (-3.38%), Mahindra & Mahindra (-3.34%), Uno Minda (-3.29%), Ashok Leyland (-3.03%), TVS Motor Company (-2.99%) and Samvardhana Motherson International (-2.99%).

Maruti Suzuki declined 2.27%, while Bharat Forge (-2.09%), Tube Investments of India (-1.99%), Exide Industries (-1.56%) and Tata Motors Passenger Vehicles (-0.82%) also traded lower.

Crude oil prices extended their sharp gains after the US and Iran exchanged strikes overnight, intensifying concerns over potential supply disruptions in the Middle East. Brent crude rose 1.08% to $95.67 a barrel in early trade after surging more than $4 in the previous session.

Higher crude prices are a negative for automobile companies as they can raise transportation and other input costs while increasing fuel expenses for consumers. A sustained rise in fuel prices can also weigh on vehicle affordability and demand, particularly in price-sensitive segments.

The selloff came despite broadly strong August auto sales, indicating that investors were looking beyond near-term volumes and focusing on the potential impact of higher crude prices, inflation and borrowing costs on future demand.

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