Iran Accord Discussions in Gulf States: Potential for Lower Oil Prices, Mixed Impact on PSX Energy and Chemical Stocks

What the Iran accord discussions mean

US Secretary of State Marco Rubio is visiting the United Arab Emirates, Kuwait, and Bahrain to engage Gulf Arab allies on a preliminary Iran accord. The discussions aim to "sell" the Trump administration's proposed deal, which regional officials are reportedly concerned could include a significant $300 billion reconstruction fund for Tehran. The excerpt also mentions GCC leaders supporting efforts to end the "U.S.-Israeli war," strongly implying the accord is related to de-escalation of regional conflict and potentially a broader normalisation or easing of sanctions on Iran.

Such a development, if it materialises, could have two main implications for global markets: a reduction in geopolitical risk in the Middle East and a potential increase in global oil supply if Iranian oil exports are eased. Both factors typically exert downward pressure on international crude oil prices.

Why lower oil prices matter for PSX stocks

International crude oil prices are a critical driver for several sectors on the Pakistan Stock Exchange. For Oil & Gas Exploration companies, their revenues are directly linked to global crude prices, as their wellhead prices are often dollar-indexed. Oil Marketing Companies (OMCs) and refineries are sensitive to crude price movements due to inventory gains or losses. Conversely, sectors that use crude oil derivatives as feedstock, such as chemicals, generally benefit from lower crude prices as their input costs decrease.

Which stocks, and why

If the Iran accord leads to a sustained reduction in global crude oil prices, the impact on Pakistani listed companies would be mixed:

Oil & Gas Development Company, Pakistan Petroleum, Pakistan Oilfields, and Mari Petroleum, all major players in the Oil & Gas Exploration sector, would likely face negative pressure. Their earnings are directly tied to international crude prices, and a decline would reduce their revenue from oil and gas production. These companies also benefit from a weaker rupee, but the primary impact here would be from the commodity price itself.

For Pakistan State Oil, Attock Petroleum, and Shell Pakistan in the Oil & Gas Marketing sector, a drop in crude prices typically leads to inventory losses. OMCs hold significant fuel inventories, and if the cost of crude falls after they've purchased it, the value of their existing stock declines, impacting short-term profitability. While lower fuel prices could eventually stimulate demand, the immediate effect of a price drop is usually negative.

Similarly, National Refinery, Attock Refinery, Pakistan Refinery, and Cnergyico PK Limited in the Refinery sector would also experience negative impacts from falling crude prices due to inventory losses. Their profitability is also driven by refining margins, but the immediate effect of a crude price decline is on the value of their crude oil inventory.

On the positive side, companies in the Chemicals sector, such as Lotte Chemical Pakistan, Engro Polymer & Chemicals, and ICI Pakistan, would likely see a positive impact. These companies use crude oil derivatives as key feedstocks for their products. Lower crude prices translate into reduced raw material costs, which can improve their profit margins, assuming product prices remain stable or do not fall proportionally.

What to watch

Investors should closely monitor further developments regarding the Iran accord, including any official statements on the easing of sanctions or the timeline for Iranian oil returning to global markets. The most direct indicator will be the movement of international crude oil prices (Brent and WTI futures). Any sustained decline in crude prices will confirm the negative impact on E&P, OMC, and refinery stocks, and the positive impact on chemical companies. Conversely, if the accord faces setbacks or does not lead to a significant increase in supply, crude prices might stabilise or even rise, reversing these dynamics.