April 06, 2026

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COST OF THE IRAN WAR FOR INDIA

Three weeks into the Iran war, and the International Energy Agency has already declared that the energy asset disruption in the oil-rich Middle East is equivalent to the two major oil crises of the 1970s and the 2022 natural gas crisis after Russia invaded Ukraine put together. Worse, while the war started on February 28 with Israel and the US combining forces to decapitate Iran's top leadership and defang its nuclear and missile prowess, it now threatens to include a wider arc of countries and become an all-out regional conflagration. The global economy has already taken a beating, with growth slowing down and inf lation soaring, bringing back unhappy memories of the economic freefall that the COVID-19 pandemic triggered six years agoUnlike the ongoing Russia-Ukraine conflict, India is already experiencing the adverse impact of the Iran War. That's because we import around 85 per cent of our crude oil, with 55-60 per cent coming from the Gulf, and over 40 per cent of this supply transiting through the Strait of Hormuz, the single chokepoint now becoming the heart of the battle. India's dependence extends to gas: it imports 60 per cent of its LPG; about half of LNG imports also travel via the same route. Beyond energy, the Gulf is central to India's external balance of payments, with 10 million Indians living and working in the region, and repatriating nearly $50 billion (Rs 4.67 lakh crore) annually, roughly a third of the total NRI remittances. Trade linkages remain equally strong, with the region accounting for about 15­17 per cent of India's exports, while also supplying key inputs like fertilisers and petrochemicals that feed directly into agriculture and industry. The Iran conflict disrupts all these channels simultaneously. Every $10 rise in crude oil adds roughly $12­15 billion to India's import bill, exerting pressure on inflation, the rupee and the current account deficit. At the same time, shipping risks through Hormuz raise freight and insurance costs, amplifying price shocks even without fuel supply cutsThe fallout is already being felt across major sectors. At the macro level, economic growth is likely to slow down under the weight of rising energy costs and inflation. On the ground, LPG shortages and fuel price spikes are hitting households directly, while industry faces higher input costs. The Modi government was quick to step in, diverting commercial supply of LPG cylinders to households,

HEADING FOR A SLOWDOWN

For Delhi-based exporter Pankaj Bansal, the disruption has been punishing. Bansal, who ships engineering goods and agri commodities across the Middle East, US and Europe, has seen freight costs surge manifold due to war surcharges. The cost of sending a container to Dubai has jumped from $150 (Rs 14,000) to $2,500 (Rs 2.35 lakh); for refrigerated cargo, it has spiked from $900 (Rs 84,000) to $7,000 (Rs 6.58 lakh). "Due to higher freight costs, buyers from the Middle East and even the US are either cancelling orders or seeking postponements," he saysWhat is unfolding for Bansal is an early signal of a wider shock--the spillover of the tensions in West Asia into India's manufacturing ecosystem. From ceramics and foundries to plastics and apparel, smaller businesses are the first to feel the pressure, with production cuts, supply disruptions and early signs of shutdowns already visible. The Rs 53,000-crore ceramic tiles industry relies heavily on propane and natural gas for production. "Currently, around 400 LPG-run MSME (Micro, Small and Medium Enterprises) units of the 750 in Morbi, Gujarat, the secondlargest tile cluster in the world, are shut down," says Haresh Bopaliya, president of the Morbi Ceramic Association (Wall Tiles Division). The remaining 350 units, which use natural gas pipelines, are operational but have scaled back production, he says. As a result, most