Indian companies are bracing for a period of uncertainty following an escalation of the West Asia crisis. The impact of the widening war in the Gulf region can be felt across sectors, as the Gulf region, according to brokerage firm Jefferies, takes 17% of India’s goods exports, supplies 55% of India’s crude oil needs and accounts for 38% of worker remittances.
Apart from the prospect of price hikes that could make its way back into consumer goods after a few quarters of commodity deflation, the spectre of rising freight costs and the disruption in supply chains and delayed shipments, due to the closure of the strategic Strait of Hormuz, are dominating boardrooms conversations at the moment.
Companies are also closely tracking the impact of the ongoing war on their projects and people in the Gulf region.
What do electronic exporters say?
Electronic exporters that FE spoke said that a delay in shipments to the Middle East may result in steep penalities levied on them by clients in the region. The UAE, India’s second-largest destination for electronics, accounted for shipments worth $4.1 billion in the first nine months of FY26. It also serves as a critical re-export hub to Africa and parts of Europe, amplifying the potential of second-order impact of any disruption.
“Geopolitical chokepoints can raise logistics costs and extend transit times. However, even in a prolonged scenario, trade flows are likely to adjust and stabilise as supply chains adapt and demand fundamentals remain strong,” Pankaj Mohindroo, chairman, India Cellular & Electronics Association, said.
But executives in fast-moving consumer goods said that the volatility in the Gulf region will likely push up the price of crude-linked derivatives which are used in making packaging materials, detergents, toothpastes, hair oils, shampoos, soaps and other daily-use items. Paint makers, meanwhile, use petroleum derivatives such as titanium dioxide in production.
This constitute 55-60% of their input costs, which also raises the prospect of price hikes when volatility increases.
“For us packaging and freight costs constitute about a fifth of our total costs,” Mayank Shah, vice-president, Parle Products, said. With crude spiking as well as the Strait of Hormuz shut due to the war, we see supply chains getting disrupted. This will likely impact packaging and transport costs. If the war drags on then we may have to take price hikes,” he said.
Price hikes may hurt previously developed momentum
At a time when urban demand is improving, Shah admits price hikes may hurt the momentum visible in consumption, following a slew of fiscal and monetary measures initiated last year.
Majors such as L&T and SP Group, which have projects running in West Asia, said they were monitoring the situation closely. The Middle East, for perspective, accounts for 37% of L&T’s Rs 7.33 lakh crore order book, and 33% of its year-to-date order inflows. L&T has also emerged as a dominant contractor in hydrocarbons along the Persian Gulf and Eastern Saudi Arabia, sector analysts said.
“The Middle East is a strategically significant market for Larsen & Toubro, with a deep and longstanding presence. We are closely monitoring the evolving situation. Our Management Committee remains updated of the situation on a real-time basis,” an L&T spokesperson said.
KEC International has a 20-25% Middle East share in its Rs 36,700-crore order book and a 28% share in year-to-date order inflows. Kalpataru Projects has 11% of its Rs 63,300 crore order book tied to the region. Both companies face execution headwinds as sea lanes face disruption, experts said.
“The safety of our people and full regulatory compliance remain our top priorities. We are closely monitoring the situation in accordance with government advisories,” Vimal Kejriwal, MD & CEO, KEC International, said.