West Asia War is Now a Direct Economic Threat to Indian Firms, Crisil Says

Rising tensions in West Asia and disruptions in key shipping routes are expected to increase cost pressures for Indian companies, according to a new assessment by CRISIL Ratings. The agency warned that sectors with strong trade links to the Middle East could face significant financial strain if the conflict involving Iran and regional rivals continues or intensifies, particularly as energy prices and logistics costs climb.

The report highlighted that industries such as fertiliser, diamond polishing, travel operators, airlines, and basmati rice exporters could be particularly vulnerable because of their direct exposure to the region. Many of these sectors rely heavily on trade flows and energy imports routed through the strategically crucial Strait of Hormuz, which has seen disruption amid the ongoing conflict. Analysts cautioned that prolonged instability could affect both operational costs and profit margins for companies operating in these industries.

According to the agency’s analysis, India imported roughly 20.1 per cent of its goods from six Middle Eastern countries during the first three quarters of the current fiscal year, amounting to over ₹10 trillion. These imports mainly consist of crude oil, petroleum products, and liquefied natural gas. At the same time, exports from India to the region—largely comprising basmati rice, fertilisers, rough and polished diamonds, capital goods, and spices—accounted for more than 15 per cent of the country’s outbound shipments.

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Energy prices have already reacted sharply to the geopolitical turmoil. The price of Brent crude has climbed above $84 per barrel, rising more than 14 per cent since the conflict began. Liquefied natural gas prices in Asian markets have also surged dramatically, increasing from around $10 per MMBtu to approximately $24–25 per MMBtu. The spike followed production disruptions in Ras Laffan Industrial City in Qatar after reported missile strikes, which led to a halt in LNG output and forced suppliers to declare force majeure on deliveries.

Industry experts say sectors that rely heavily on imported energy could feel the impact first. Companies involved in ceramics and fertiliser manufacturing may face near-term production challenges due to their dependence on LNG imports, while crude-linked sectors such as oil refining, tyres, paints, speciality chemicals, flexible packaging, and synthetic textiles could experience rising input costs. With India importing around 85 per cent of its crude oil and about half of its LNG requirements, disruptions to supply chains could ripple through multiple segments of the economy.

Beyond energy costs, the conflict has also pushed up air and sea freight rates as well as insurance premiums for shipping routes across the region. Analysts warn that if the instability persists, it could widen India’s current account deficit, fuel domestic inflation, and erode corporate profitability. While liquefied petroleum gas imports—two-thirds of which come from the Middle East—are primarily used for household consumption, the broader rise in logistics and energy costs may still pose significant challenges for Indian businesses operating in global markets.

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