A prolonged war in the Middle East could adversely affect several Indian sectors with direct trade exposure to the region, including basmati rice, fertilisers, diamond polishing, airlines and travel operators, according to Crisil Ratings.
The rating agency said sectors dependent on imported Liquefied Natural Gas (LNG), like ceramics and fertilisers, may also face near-term production disruptions, while crude-linked industries, including oil refiners, tyres, paints, specialty chemicals, flexible packaging and synthetic textiles, could see cost pressures if energy prices remain elevated.
Countries in the Middle East account for about 30 per cent of global crude oil and 20 per cent of global LNG production, most of which is transported through the Strait of Hormuz. India imports roughly 85 per cent of its crude oil and about half of its LNG with 40-50 per cent of crude oil and 50-60 per cent of LNG shipments routed through the strait.
According to Crisil, most shipping vessels have halted passage through the Strait of Hormuz since March 1, citing heightened risks. “Any prolonged disruption of this trade route will have a bearing on global crude oil and LNG availability, and their prices,” it said.
Energy prices surge
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 Liquefied Natural Gas (LNG) prices have surged from about USD 10 per million British thermal unit to USD 24-25 per metric million British thermal unit (mmBtu).
“A further surge would widen India's current account deficit and stoke 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 industry is expected to be limited as only about 10 per cent 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.
Moderate trade exposure
India's direct merchandise trade with the Middle East accounts for around 15 per cent of total exports and 20 per cent of imports during the first nine months of the current fiscal year. Apart from crude oil and petroleum products, key trade items include basmati rice, fertilisers and rough and polished diamonds, along with certain capital goods and spices. Service sectors like airlines and travel operators also have significant exposure to the region.
Sectoral impact
Crisil said basmati rice exports, of which 70-72 per cent go to West Asia, could face shipment delays and possible payment delays if tensions persist, potentially stretching exporters’ working capital cycles.
The fertiliser sector, which imports around 30 per cent of its requirement, could see supply-chain disruptions as the Middle East supplies roughly 40 per cent of India’s fertiliser imports and a substantial share of key raw materials like rock phosphate and phosphoric acid. Higher global prices and rising LNG costs could increase the government's fertiliser subsidy burden.
For diamond polishers, the Middle East is a major trading hub, with Israel and the UAE accounting for about 18 per cent of India's diamond exports. However, alternate trading centres like Belgium and Hong Kong may partly mitigate the impact.
In aviation, around 10 per cent 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 like Southeast Asia.
Also read: LNG supplies to India hit as Qatar stops production
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