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Informist, Thursday, Mar. 5, 2026

 

MUMBAI – If the ongoing hostilities in West Asia persist or escalate, it could adversely impact several sectors in India such as basmati rice, fertilisers, diamond polishing, travel operators, and airlines, due to their direct exposure to the region, Crisil Ratings said in a report Thursday. Sectors that are highly dependent on imported liquefied natural gas such as ceramics and fertilisers could see near-term impact on production and crude oil-linked sectors such as downstream oil refiners, tyres, paints, specialty chemicals, flexible packaging, and synthetic textiles could also be affected, the ratings agency said.

 

Countries in West Asia account for around 30% of global crude oil production and around 20% of global liquefied natural gas production. A majority of this is transported 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," Crisil Ratings said.

 

India imports about two-third of its liquefied petroleum gas requirement, with majority of it from West Asia. LPG is primarily used towards household consumption with only about 10% used as fuel in industries, which will limit the impact on India Inc. "Furthermore, 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. This will bear watching," the ratings agency said.

 

SECTORAL IMPACT

Crisil Ratings said the recent hostilities may hurt exports of Indian basmati rice as these could face delays in shipments and payments. West Asia accounts for 70-72% of India's basmati rice export volumes. India imports around 30% of its fertiliser requirement and West Asia supplies about 40% of that, Crisil Ratings said. "The ongoing uncertainties can lead to supply-chain disruption with possible impact on imports to India. Since the region also plays a key role in the global supply chain, there is a likelihood of an increase in the international prices for urea and di-ammonium phosphate," it added.

 

"Additionally, LNG is a feedstock for manufacturing urea. Its reduced availability, or increased prices, will impact production or raise input costs. All of these, in turn, can result in a higher subsidy requirement than budgeted by the government," it said.

 

West Asia is a major trading hub for India's diamond exports, which are already under pressure from higher US tariffs. However, diamond polishers have alternative trading hubs such as Belgium and Hong Kong which could mitigate the impact.

 

LNG imports account for about 40% of the total demand from city gas distribution and the hostilities in West Asia could affect LNG supplies in the near term. "The impact, however, would be primarily on the industrial segment, which is heavily reliant on imported gas and may experience a drop in sales volume because of supply constraints," it said. Margins in the segment will be cushioned to some extent, as prices for most alternatives for customers are linked to crude oil, which is expected to rise.

 

A prolonged rise in crude oil prices would pressure gross refining margins of downstream oil refiners as higher input costs may not be fully or immediately passed through an increase in retail fuel prices, the ratings agency said. On the other hand, rising crude oil prices will benefit upstream oil companies as these translate to more revenue, while costs are fixed.

 

There could be some pressure on the profit margins in the paints and specialty chemicals sector as around 30% of the production cost is linked to crude oil prices. "...competitive intensity and suppressed demand could limit ability to pass on elevated input prices to customers and thereby impact profitability to some extent," it said.

 

Besides the Strait of Hormuz, the Red Sea route through the Suez Canal is another critical shipping lane in West Asia, which is extensively used for global merchandise and crude oil trade connecting Asia with Europe, North America, and North Africa. Although trade through the Suez Canal has declined significantly over the past 15-18 months following attacks from the Houthi rebels, it remains substantial, Crisil Ratings said. "Any major disruption to this shipping route, as a potential domino effect of the conflict, could further impact crude oil prices and shipping time and cost and will warrant close monitoring."  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Ashish Shirke

 

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