India runs a $75 billion export relationship across West Asia, imports 55% of its crude oil from the region, and receives $45 billion in annual worker remittances from there (38% of total remittances)
When the Strait of Hormuz comes under stress, India does not get to sit on the sidelines. A March 1, 2026 Jefferies note titled Middle East Conflict – Impact Likely to Be Short-Term sets out the macro exposure in detail and names the sectors most at risk and the ones that could benefit
Here is what Jefferies has to say about the possible impact on various sectors –
1. Oil marketing companies take the first hit
The moment crude prices spike, Indian oil marketing companies Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Indian Oil Corporation absorb the blow directly. Retail fuel prices in India have been flat for roughly two and a half years, with marketing margins absorbing volatility
Jefferies is explicit about the pressure that if crude sustains above US$80 per barrel, the government may eventually have to either raise retail fuel prices or cut excise duties
Both options are uncomfortable; one pushes inflation higher. The other strains the fiscal balance, the firm added.
Every $10 per barrel move in crude has about a 35 basis point impact on India’s current account deficit. It can also have a 20 to 25 basis point impact on CPI if passed on to consumers, or on the fiscal deficit if taxes are cut.
2. Gas distribution firms face a feedstock cost problem
Indraprastha Gas, Mahanagar Gas, and Gujarat Gas buy liquefied natural gas as feedstock and pass costs to city consumers. The Strait of Hormuz accounts for roughly 15% of global LNG supplies
A spike in LNG prices raises their input costs materially.
Petronet LNG and GAIL India are also exposed because higher prices can hurt volumes when demand softens
Jefferies says high LNG prices can increase feedstock costs for city gas distributors and affect volumes for PLNG and GAIL
3. Aviation gets hit from two directions at once
IndiGo has 35 to 40% of its international capacity deployed on Middle East routes, which translates to 10 to 12% of its total capacity
If tensions disrupt travel or airspace, demand on those routes drops. At the same time, Aviation Turbine Fuel costs rise because they track crude prices. That combination pressures margins immediately
Airports such as GMR Airports Infrastructure and online travel aggregators are also exposed to weaker international passenger flows. Hotels could see a dip in foreign tourist arrivals
4. Hospitality and hotels see foreign tourist arrivals soften
Jefferies describes hotels as an immediate negative. A Middle East conflict that freezes trade and travel would likely reduce inbound foreign traffic, especially from the region
There is no obvious short-term offset if international arrivals slow meaningfully.
5. Rate-sensitive names face pressure from higher crude
If crude remains elevated and inflation rises, monetary flexibility narrows. Jefferies lists rate-sensitive names as immediate negatives in this case
The macro link the firm says is that higher crude pushes inflation. If the government absorbs the shock, fiscal slippage increases. Either way, tighter financial conditions weigh on banks and non-banking financial companies.
6. Companies with direct Middle East revenue exposure
Larsen & Toubro has more than 25% of consolidated revenues tied to the Middle East and over 40% of its EPC order book in the region
Newgen Software Technologies derives roughly 30% of its revenues from the Middle East
Jefferies also points to meaningful 5 to 10% exposure at consumer companies such as Dabur and Titan, select pharma firms including Ajanta Pharma, Biocon, and Cipla, major hospital chains that earn 8 to 10% from international patients, and names such as PB Fintech and Voltas
7. Defence is the one beneficiary
India’s defence capital expenditure is running at about 0.6% of GDP, below the earlier peak of 1.0% and lower than peers such as Russia (7.1%), the United States (3.4%), and Pakistan (2.7%)
Defence spending rose 18% year on year in FY26E, versus a 10-year CAGR of 6 to 8%. Jefferies expects double-digit growth to continue and projects defence capex to rise by about 25% CAGR over FY26–31 to reach 1% of GDP
The brokerage remains positive on Bharat Electronics, Data Patterns (India), and Hindustan Aeronautics
The Strait of Hormuz is the key variable
The key issue is duration. The Strait handles about 20% of global crude oil and 20% of global LNG consumption. Initial estimates suggest 10 to 13 million barrels per day of crude exports could be affected. Around 15% of global LNG supplies are at risk
India receives 2.5 to 2.7 million barrels per day, or roughly 50 to 60% of its crude, via the Strait. About 50% of India’s LNG also comes through that route
Jefferies’ base case is that any blockade will be brief because sustained disruption would drive global energy prices sharply higher. But a prolonged closure with sustained high crude prices would turn this from a short-term market event into a genuine macro problem
What history shows
Jefferies refers to the June 2025 Israel-Iran escalation. On the day of escalation, IndiGo fell 3.9%, Ajanta Pharma dropped 3.5%, and Indian Oil, BPCL, and HPCL fell between 1.6% and 2%. Most recovered within a week
That is the pattern Jefferies is using. A few uncomfortable days, a sharp dip, then normalisation if the disruption is brief.
The brokerage concludes that the conflict’s impact on Indian markets is likely to be short-term. The sectors to watch are oil marketing companies, gas distributors, aviation, hospitality, and companies with heavy Middle East revenue exposure. Defence remains the structural beneficiary