Middle East Conflict May Impact India’s Basmati, Diamonds, Airlines: CRISIL

Countries in the Middle East produce nearly 30 percent of the world’s crude oil and about 20 percent of global Liquefied Natural Gas (LNG), and most of this energy supply moves through the Strait of Hormuz. Because of this strategic route, any prolonged conflict in the region can quickly disrupt global energy markets. According to Crisil Ratings, several Indian industries that maintain strong trade links with the Middle East may face challenges if the tensions continue. Sectors such as basmati rice exports, fertilisers, diamond polishing, airlines and travel operators could experience operational disruptions and rising costs due to the conflict.

Industries that rely heavily on imported LNG, including ceramics and fertilisers, may face short-term production disruptions if supply becomes constrained. At the same time, crude-linked sectors such as oil refining, tyres, paints, specialty chemicals, flexible packaging and synthetic textiles could encounter higher production costs if energy prices remain elevated. India imports around 85 percent of its crude oil and about half of its LNG needs, and a large portion of these shipments passes through the Strait of Hormuz. Nearly 40–50 percent of India’s crude oil and 50–60 percent of its LNG imports travel through this route.

The ongoing tensions have already started affecting shipping activity in the region. Since March 1, 2026, many shipping companies have stopped sending vessels through the Strait of Hormuz because of increased security risks. Analysts warn that any long-term disruption along this crucial trade route could tighten global supply of crude oil and LNG, pushing prices even higher. Such disruptions could also create volatility in global energy markets and increase uncertainty for industries dependent on imported fuel.

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Energy Prices Surge Amid Rising Middle East Tensions

Energy prices have already risen sharply as tensions escalate. Brent crude oil prices have climbed to about 82–84 dollars per barrel from an average of around 66–67 dollars during January and February 2026. At the same time, Asian spot LNG prices have surged from roughly 10 dollars per million British thermal unit to about 24–25 dollars per mmBtu. Crisil noted that if energy prices rise further, India may face a wider current account deficit and higher inflation, while many companies could see pressure on their profit margins due to rising input costs.

India also imports nearly two-thirds of its Liquefied Petroleum Gas (LPG) requirement, largely from the Middle East. However, the impact on industries may remain limited because only around 10 percent of LPG consumption comes from industrial use, while most of it is used by households. Meanwhile, freight and insurance costs have already increased due to regional tensions, which may affect sectors that depend heavily on international trade and global shipping routes.

Crisil highlighted that India’s direct merchandise trade with the Middle East accounts for roughly 15 percent of the country’s total exports and about 20 percent of imports. Key exports to the region include basmati rice, diamonds and several agricultural products, while imports include crude oil, fertilisers and other raw materials. If tensions persist, basmati exporters could face shipment delays, fertiliser supplies may encounter disruptions, and airlines could experience higher fuel costs and route diversions. Travel operators may also see cancellations for Middle East destinations, although demand could shift toward alternative regions such as Southeast Asia.

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