According to Crisil Ratings, a prolonged war in the Middle East could adversely affect several Indian sectors with direct trade exposure to the region, including basmati rice, fertilizers, diamond polishing, airlines, and travel operators.
The rating agency said that sectors dependent on imported Liquefied Natural Gas (LNG), such as ceramics and fertilizers, may also face near-term production disruptions. Industries linked to crude oil, including oil refineries, tires, paints, specialty chemicals, flexible packaging, and synthetic textiles, could see cost pressures if energy prices remain elevated.
About 30% of global crude oil and 20% of global LNG production comes from the Middle East, most of which is transported through the Strait of Hormuz. India imports approximately 85% of its crude oil and about half of its LNG, with 40-50% of crude oil and 50-60% of LNG shipments passing through the strait. Crisil noted that most shipping vessels have halted passage through the Strait of Hormuz since March 1, 2026, citing heightened risks.
"Any prolonged disruption of this trade route will have an impact on global crude oil and LNG availability, and their prices," Crisil stated.
Rising Energy Prices
Brent crude prices have already risen to USD 82-84 per barrel from an average of USD 66-67 in January-February 2026, while Asian spot LNG prices have surged from about USD 10 per million British thermal unit to USD 24-25 per mmBtu.
"This further surge could widen India's current account deficit and increase inflation. It will also impact India Inc.'s profits, given the critical role of energy across sectors," Crisil said.
India also imports about two-thirds of its Liquefied Petroleum Gas (LPG) requirement, largely from the Middle East. However, the impact on the industry is expected to be limited as only about 10% of LPG consumption is industrial, with the rest used by households.
Freight and insurance costs have also increased amid the tensions, which may affect export- and import-oriented sectors with large global trade exposure.
Direct Trade Exposure
India's direct merchandise trade with the Middle East accounts for around 15% of total exports and 20% of imports during the first nine months of the current fiscal year.
Key trade items include crude oil and petroleum products, basmati rice, fertilizers, and rough and polished diamonds, along with certain capital goods and spices. Service sectors such as airlines and travel operators also have significant exposure to the region.
Sectoral Impact
Crisil said that basmati rice exports, of which 70-72% go to West Asia, could face shipment delays and possible payment delays if tensions persist, potentially stretching exporters' working capital cycles.
The fertilizer sector, which imports around 30% of its requirement, could see supply-chain disruptions as the Middle East supplies roughly 40% of India's fertilizer imports and a substantial share of key raw materials such as rock phosphate and phosphoric acid. Higher global prices and rising LNG costs could increase the government's fertilizer subsidy burden.
For diamond polishers, the Middle East is a major trading hub, with Israel and the UAE accounting for about 18% of India's diamond exports. However, alternate trading centres such as Belgium and Hong Kong may partly mitigate the impact.
In aviation, around 10% of Indian airline flights transit through the Middle East. Airspace restrictions and airport closures, including at Dubai, have disrupted operations. Airlines may also face higher fuel costs due to longer routes to Europe and the United States.
Travel operators may see cancellations and postponements for Middle East destinations, though insurance coverage limits direct financial losses. Demand could shift to alternate destinations such as Southeast Asia.
In the ceramics sector, limited availability of LNG and LPG could force plants to reduce utilization, while exports - about 40% of sector revenue - may be affected as the Middle East accounts for over 15% of shipments.
For city gas distributors, LNG supply disruptions could mainly affect industrial customers that rely heavily on imported gas, potentially reducing sales volumes.
Meanwhile, sectors such as oil refining, tires, paints, and specialty chemicals may face margin pressure as higher crude-linked input costs may not be immediately passed on to customers.
Flexible packaging and synthetic textile producers may see a relatively moderate impact due to improved demand-supply dynamics and partial pass-through of costs.
Potential Beneficiaries
According to Crisil, higher crude prices could benefit upstream oil companies, which may see increased revenues with largely fixed costs. Shipping companies could also gain from higher charter rates amid reduced vessel availability and longer shipping routes.
Crisil also cautioned that further disruptions in key maritime routes, including the Red Sea corridor via the Suez Canal, could amplify the impact on global trade, shipping costs, and energy prices.
While the immediate impact on most Indian companies is expected to remain limited due to strong balance sheets, prolonged geopolitical tensions could intensify supply-chain disruptions, sustain high oil and gas prices, and increase inflationary pressures.
Crisil said it will continue to monitor the developments and assess the credit impact on individual companies.
