Rising geopolitical uncertainties in the Middle East and disruptions to shipping through the Strait of Hormuz could affect several sectors of the Indian economy, including basmati rice, fertilisers, airlines and energy-linked industries, according to a report by Crisil Ratings.
“If the ongoing geopolitical uncertainties in the Middle East persist or escalate, there could be adverse impact on sectors such as basmati rice, fertilisers, diamond polishing, travel operators and airlines, given their direct exposure to the region,” Crisil said.
Energy Chokepoint
The report said sectors dependent on imported gas could also face near-term operational challenges. “Additionally, sectors such as ceramics and fertilisers, with high dependence on imported liquefied natural gas (LNG), could see near-term production impact, so will require close monitoring. Crude-linked sectors, such as downstream oil refiners, tyres, paints, specialty chemicals, flexible packaging and synthetic textiles could also be affected.”
The Middle East plays a key role in global energy supply chains. “Countries in the Middle East account for ~30% of global crude oil and ~20% of global LNG production. A majority of this is transported through the Strait of Hormuz.”
India remains heavily dependent on imported energy supplies routed through the corridor. “India imports ~85% of its crude oil and half of its LNG requirement. Of this, 40-50% of crude oil and 50-60% of LNG are shipped through the Strait of Hormuz. Most shipping vessels have stopped sailing on this route since March 1, 2026, due to increased risk of passage and any prolonged disruption of this trade route will have a bearing on global crude oil and LNG availability, and their prices.”
Energy markets have already reacted sharply. “The price of Brent crude has already surged to around $82-84 per barrel (bbl) from an average $66-67 during January-February 2026. For Asian spot LNG, price has flared up from ~$10/MMBtu to $24–25/MMBtu.”
The rating agency warned that higher energy prices could have macroeconomic implications. “A further surge would widen India’s current account deficit and stoke inflation. It will also impact India Inc’s profits, given the critical role of energy across sectors.”
The report also highlighted India’s dependence on LPG imports. “India also imports about two-third of its liquefied petroleum gas (LPG) with majority of it from the Middle East. LPG is primarily used towards household consumption with only ~10% used as fuel in industries, limiting the impact on India Inc.”
Trade and Logistics
Rising geopolitical tensions have also begun to affect logistics and trade costs. “The ongoing uncertainties have increased air/sea freight costs and insurance premiums for export/import-based sectors, which could impact the profitability of those with significant trade exposure globally.”
India’s trade exposure to the Middle East remains significant. “India’s direct trade with the Middle East is moderate, accounting for ~15% of total exports and ~20% of total imports in the first nine months of this fiscal. In addition to crude oil and petroleum products, merchandise trade with the Middle East consists primarily of basmati rice, fertilisers and rough/polished diamonds, as well as some capital goods and spices. Furthermore, various services sectors, including airlines and travel operators, also have significant direct and indirect exposure to the region.”
Despite the risks, the report noted that the near-term impact on companies may remain manageable. “Notwithstanding the potential risks, the near-term impact on most Indian companies is expected to be limited, given their robust balance sheets, which provide a cushion against vulnerabilities.”
However, Crisil cautioned that prolonged tensions could amplify the economic impact. “Prolonged geopolitical uncertainties in the Middle East could exacerbate the impact, primarily due to stickily elevated oil and gas prices and disruption of supply chains that could, in turn, stoke inflationary pressures.”