How The US–Israel–Iran Conflict Could Impact India’s Economy And 15 Key Sectors

March 7, 2026, 12:43 pm

The rising conflict between the United States, Israel, and Iran in West Asia may set off a variety of economic consequences for India. These consequences may affect India’s economy in various ways, including inflation, currency stability, and various sectors of India’s economy. As per investment banker Sarthak Ahuja, at least 15 sectors and business segments of India’s economy may face a direct or indirect impact of this conflict. India’s economy may face a major impact due to rising oil prices, as India imports almost 90% of its crude oil. However, that’s not all. Shipping, aviation, remittances, agricultural products, and various manufacturing industries may also face a direct or indirect impact. Export-oriented industries like basmati rice and gems and jewelry may also face operational issues. Therefore, the impact of this conflict on India’s economy depends upon the duration of this conflict.

Rising Crude Oil Prices and Inflation Risk

First, crude oil prices often rise during geopolitical tensions in the Gulf region. Any disruption to energy supply routes immediately affects global oil markets. For India, the impact could be significant.

India imports nearly 90 per cent of its crude oil requirement. Therefore, even a moderate rise in oil prices increases the country’s import bill. Higher oil prices quickly push inflation upward. Fuel costs influence transport, logistics and manufacturing expenses.

As fuel prices increase, so do transportation costs. As a result, prices of goods and services also increase. There may also be implications for public finances. Subsidies and import costs of energy may increase.

Higher Shipping and Insurance Costs

Second, the conflict may lead to higher freight and insurance costs for global shipping and one of the most sensitive global trade routes includes the strategic Strait of Hormuz.

An increase in geopolitical risks in this part of the world means that insurance costs for cargo vessels are higher. As a result, Indian exporters and importers may face lower profit margins.

Exporters already operate in a highly competitive global market. Therefore, rising freight costs may weaken their pricing advantage.

Pressure On the Indian Rupee

Third, the conflict could weaken India’s currency. According to Sarthak Ahuja, the Indian rupee may depreciate against the US dollar if oil prices remain high.

A higher oil import bill increases demand for dollars. Consequently, the rupee may lose value. A weaker rupee then makes imports more expensive.

This creates another inflationary pressure. India depends heavily on imported energy, electronics and industrial inputs. Therefore, currency weakness can quickly transmit price shocks across the economy.

Aviation Disruptions and Travel Slowdown

Fourth, there is a possibility of disruptions in the aviation sector. This is because airlines have already experienced flight cancellations and route diversions owing to airspace restrictions in West Asia.

Another major concern is the cost of fuel. Aviation turbine fuel is influenced by global crude oil prices. An increase in the price of fuel will lead to an increase in the cost of flying.

If the disruption in travel is sustained, there is a possibility that international travel will be affected. This will also affect business activities.

Temporary Rise in NRI Remittances

It’s noteworthy that geopolitical uncertainty can lead to a temporary increase in remittances sent by non-resident Indians. During these periods, NRIs may send additional remittances as a precautionary measure.

Remittances can add to India’s foreign exchange reserves. Nevertheless, as Sarthak Ahuja points out, these remittances may not be fully utilized by the public. They may be saved instead.

It’s possible that remittances may not positively impact consumer spending.

Basmati Rice Exports Face Disruption

Besides the macroeconomic effects, there are a few specific industries which may be directly impacted. The export market of basmati rice is one such industry.

Iran is the largest importer of Indian basmati rice. Iraq ranks second in the import list of Indian basmati rice. Additionally, the Gulf countries collectively import more than half of India’s premium quality rice.

Because of these disruptions, more than 200,000 tones of basmati rice shipments are currently stuck in transit. If this situation persists, exporters may face difficulties in meeting their existing commitments.

This may lead to excess supply in the domestic market. As a result, prices may fall. Farmers may face financial difficulties.

Gems And Jewelry Supply Chain Risks

The gems and jewelry industry may also face challenges. A large share of India’s gold and rough diamond imports passes through the trading hub of Dubai.

Disruption of supply along this route may slow down manufacturing activity. The diamond processing center of Surat is likely to be affected.

Less gold supply may also lead to a rise in domestic gold rates.

Manufacturing Sectors Face Input Cost Pressures

Several manufacturing industries may also see rising input costs. Textile and garment manufacturers depend heavily on polyester yarn.

If the prices of petrochemicals rise because of increased prices of oil, it is also possible that the prices of yarns would rise. This would affect the profit margins of exporters.

In the same way, industries like paint, tires, and chemical products also require petrochemicals as inputs. As the price of crude oil goes up, the prices of these products also rise.

Manufacturers may eventually pass these costs to consumers. This would further contribute to inflation.

Agriculture And Fertilizer Supply Concerns

Agriculture may also experience indirect effects. Nearly 70 per cent of India’s Sulphur fertilizer imports come from Gulf countries.

If supply disruptions occur, fertilizer prices could rise sharply. The government may need to increase subsidies to protect farmers.

However, higher subsidies may divert fiscal resources. Funds that could have supported infrastructure development may instead go toward agricultural support.

Travel And Tourism Adjustments

International travel demand may also soften if tensions escalate further. Tourists and business travelers may avoid routes passing through conflict-prone regions.

Travel operators may therefore shift focus toward domestic tourism. Indian destinations may see higher demand as travelers avoid international routes.

India May Turn to Alternative Energy Sources

In order to reduce supply risk, India should consider increasing imports from Russia. The country already uses discounted crude from Russia to reduce energy costs.

This will help the country reduce the current pressure. Nevertheless, the volatility of the global oil market will still affect the pricing.

The long-term effects of the conflict will determine the level of the economic impacts. If the conflict subsides, the impacts will be minimal. Nevertheless, a long conflict will affect the pricing, supply, and operations of various sectors of the economy.

Today India economy News | Latest India economy News | Breaking India economy News in English | Latest India economy News Headlines -