Middle East Tensions Threaten Over 30 Indian Companies; Supply Chains at Risk

The Economic Times reported on March 2, 2026, that a significant escalation in tensions between Iran and Israel, frequently referred to as a 'war' or 'conflict' in various news outlets, is creating substantial geopolitical risks for over 30 listed Indian companies. This precarious situation in the Middle East, exacerbated by reports of US-Israeli strikes on Iran and subsequent Iranian retaliation, threatens vital supply routes, particularly through the Strait of Hormuz, and is causing crude oil price volatility and trade disruptions. India, a major energy importer, is particularly vulnerable to this instability. Nearly 20% of global oil flows and over 40% of India's crude imports pass through the Strait of Hormuz, a critical maritime chokepoint. Any sustained closure or disruption of this strait, as reportedly occurred with Iran's closure of the Strait of Hormuz to shipping, would have severe economic consequences for India, leading to immediate energy cost escalation across refining, chemicals, fertilizers, aviation, and transport sectors. The macroeconomic impact on India is profound. Each $1 increase in crude oil prices is estimated to add approximately $2 billion to India's annual import bill, exerting pressure on trade balances and foreign exchange reserves. Such sustained high crude prices could elevate petrol, diesel, and LPG prices domestically, strain public finances, and widen the current account deficit (CAD). Economists and banking experts have warned that a $10 per barrel increase in crude prices could widen India's CAD by 0.3-0.5% of GDP and lift CPI inflation by 30-40 basis points, making it not just a geopolitical story but a significant macroeconomic challenge. Numerous Indian companies across diverse sectors face direct and indirect exposure. In the **infrastructure and EPC (Engineering, Procurement, and Construction) sector**, major players like Larsen & Toubro (L&T) are significantly exposed, with the Middle East accounting for 37% of its substantial order book and 33% of its order inflows. KEC International has a 20% Middle East share in its order book and 28% in year-to-date order inflows, while Kalpataru Projects (KPIL) has 11% of its order book tied to the region. Thermax, Cummins India, and Voltas also have meaningful business linkages and order book exposure to the Middle East, facing potential execution headwinds due to sea lane disruptions. **Aviation, logistics, and ports** are also highly susceptible. GMR Airports faces risks from potential flight cancellations and rerouting, while JSW Infrastructure has direct exposure through its Fujairah liquid terminal storage. Adani Ports, which acquired the Haifa port in Israel, is particularly vulnerable to declining oil tanker, LNG, and container volumes through the Persian Gulf, with its shares already plunging amid the escalating conflict. Aegis Logistics could be adversely impacted by rising LPG import prices due to Middle East supply disruptions. The **energy sector**, especially Oil Marketing Companies (OMCs) like HPCL, IOC, and BPCL, will likely experience margin compression due to higher crude costs if these cannot be fully passed on to consumers. Conversely, upstream oil firms like ONGC and Oil India Limited might see their earnings linked to rising global crude prices. In the **consumer and pharmaceutical sectors**, companies with 5-10% Middle East revenue exposure, such as Dabur, Titan, Ajanta Pharma, Biocon, and Cipla, could face demand-driven risks from a slowdown in Gulf Cooperation Council (GCC) economic activity or currency volatility. Major hospital chains deriving 8-10% of revenues from international patients are also at risk. Kalyan Jewellers, with 12% of its consolidated topline from the Middle East, and Sun Pharma, with 5% revenue from Israel, are specifically identified. **IT and software companies** like Newgen Software (approx. 30% of revenues from the region) and Tata Consultancy Services (TCS), with significant exposure to the Middle East and North Africa (MEA) region, face potential slowdowns as higher oil prices and geopolitical uncertainty affect enterprise technology budgets in the Gulf. Other companies, including auto exporters, face margin pressure from both higher freight costs and crude-linked input cost inflation. Bharat Electronics Ltd (BEL) has defence export ties and joint ventures in the region, including with Israel, while Samvardhan Motherson and Paras Defence also have some exposure. The conflict also causes broader **supply chain disruptions**. Houthi attacks in the Red Sea and potential actions against Iran could significantly disrupt global oil supplies. Rerouting via the Cape of Good Hope adds 15-20 days to delivery schedules and increases freight costs by 15-20%, impacting exports of rice, textiles, and electronics from India, and pushing up prices for essential imports like pulses and onions. War risk insurance premiums have also seen steep increases. The overall sentiment among Indian businesses is cautious, with some advertising campaigns reportedly put on hold due to the Middle East conflict, reflecting a broader watch-and-wait approach. In essence, the escalating Iran-Israel conflict presents a multifaceted threat to the Indian economy, impacting corporate earnings, inflation, trade balances, and strategic energy security, necessitating a careful and adaptive approach from both businesses and policymakers.

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