Mapping the fallout: Which Indian sectors face risks from the West Asia war?

The closure of the Strait of Hormuz since late February 2026, triggered by the US-Israel conflict with Iran, has created an acute energy crisis with cascadin...

What Happened

The closure of the Strait of Hormuz since late February 2026, triggered by the US-Israel conflict with Iran, has created an acute energy crisis with cascading effects across nearly 30 Indian economic sectors.
India's heavy dependence on West Asian energy — approximately 45% of crude oil, 60% of natural gas, and over 90% of LPG imports originate from the region — has made the economy acutely vulnerable.
Sectors spanning aviation (jet fuel), fertilizers (urea and DAP), petrochemicals, ceramics, textiles, and steel are all facing higher input costs, supply disruptions, or both.
Rising freight costs and tighter crude supply are feeding directly into domestic inflation, widening the Current Account Deficit, and putting downward pressure on the rupee.
India's Strategic Petroleum Reserves, currently about 64% full (~3.37 million tonnes), provide only approximately 9.5 days of import cover — far below the IEA standard of 90 days for member states.

Static Topic Bridges

India's Crude Import Profile and West Asia Dependence

India is the world's third-largest oil consumer and importer, meeting approximately 85–88% of its crude oil needs through imports. West Asia (the Middle East) is the dominant source region.

Top crude suppliers to India: Iraq (~25%), Saudi Arabia (~18%), Russia (~16%), UAE (~7%), Kuwait and others.
India's total crude import bill can exceed USD 130–150 billion in a high-price year.
The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas monitors import statistics, price trends, and stock levels.

Connection to this news: With roughly two-thirds of India's crude still sourced from West Asia transiting Hormuz, even a partial disruption inflates the import bill and pressures the external account, particularly when global prices are already elevated due to the conflict.

India's Strategic Petroleum Reserves (SPR)

India's Strategic Petroleum Reserves Limited (ISPRL) manages three underground cavern facilities built to insulate the country against short-term supply shocks.

Visakhapatnam, Andhra Pradesh: 1.33 million metric tonnes (MMT) capacity
Mangaluru, Karnataka: 1.5 MMT capacity
Padur, Karnataka: 2.5 MMT capacity
Total Phase-I capacity: 5.33 MMT
Current storage (2026): ~3.37 MMT, approximately 64% of total capacity
Current reserve covers approximately 9.5 days of import equivalent — well below IEA's 90-day benchmark
Phase-II expansion: Chandikhol (Odisha, 4 MMT) and additional Padur (2.5 MMT) approved in 2021

Connection to this news: The SPR's limited cover of ~9.5 days means India cannot insulate itself from a prolonged Hormuz closure through strategic stocks alone, heightening the urgency of diplomatic resolution and import diversification.

Key Sectors at Risk

Aviation — Aviation Turbine Fuel (ATF)

ATF prices are directly linked to crude and jet fuel benchmarks. India's domestic ATF is predominantly sourced from refineries processing imported crude.

India's aviation sector is one of the fastest-growing globally, with domestic passenger volumes exceeding 150 million annually.
ATF constitutes 25–35% of airline operating costs.
A sustained increase in crude prices raises ATF prices proportionally, squeezing airline margins and raising ticket prices.

Connection to this news: The West Asia war-driven crude spike has already materially raised ATF costs, reducing airline profitability and potentially feeding into consumer price inflation through higher airfares.

Fertilizers — Urea and DAP

India is a large importer of fertilizers or their feedstocks. Natural gas is the primary feedstock for urea production; DAP (Di-Ammonium Phosphate) imports come partly from West Asian producers.

Over 30% of global urea is produced in Gulf countries using natural gas, much of which transits Hormuz.
India subsidises fertilizers heavily; a price spike raises the fertilizer subsidy bill, stressing the fiscal deficit.
India imported approximately 7–8 million tonnes of urea annually in recent years.
Natural gas shortage in Gulf countries affects urea availability globally.

Connection to this news: Disrupted LNG and natural gas supply through Hormuz directly constrains Gulf urea production, tightening global supply and raising import costs for India — with the fiscal cost absorbed either by the government (higher subsidy) or passed on to farmers.

Steel and Manufacturing

LNG is used as an industrial fuel in steelmaking and manufacturing. Freight cost increases affect the landed cost of raw material imports (metallurgical coal, iron ore).

Capesize freight rates rose from ~USD 9.80 to USD 12.20 per tonne within weeks of the conflict starting in March 2026, raising the landed cost of met coal and iron ore.
Gas-based ironmaking (using direct reduced iron/DRI process) is particularly vulnerable to LNG supply disruptions.
LPG shortages affect stainless steel manufacturing processes.

Connection to this news: Steel input cost increases feed into downstream manufacturing costs, potentially reducing Indian export competitiveness and squeezing margins across the manufacturing value chain.

Ceramics and Glass

Both industries use natural gas as process fuel in kilns and furnaces. Limited substitution options exist in the short run.

India's ceramic tile industry (centred in Morbi, Gujarat) is one of the largest globally.
Natural gas accounts for 30–40% of ceramic production costs.
Alternative fuels (coal, LPG) are costlier and technically less suitable for consistent ceramic quality.

Connection to this news: LNG/gas price increases translate almost directly into higher production costs for ceramics, threatening competitiveness of exports and pushing up domestic construction material prices.

Textiles — Polyester Chain (PTA/MEG)

Polyester fibre and yarn are derived from petrochemicals — Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), both ultimately derived from crude oil.

India is a major polyester producer and exporter; the sector employs millions directly and indirectly.
PTA and MEG prices move with crude oil and naphtha prices.
Upstream crude price rises propagate within 4–6 weeks to synthetic fibre prices, affecting garment exports.

Connection to this news: Elevated crude prices inflate the cost of the entire synthetic textile chain, squeezing margins for exporters operating in price-sensitive global markets.

Macroeconomic Transmission Channels

Current Account Deficit (CAD) and Rupee

A sustained rise in crude prices directly inflates India's import bill, widening the CAD. A wider CAD typically puts depreciation pressure on the rupee, which in turn raises the cost of all imports further — creating a feedback loop.

Every USD 10 per barrel rise in crude prices widens India's CAD by approximately 0.4–0.5% of GDP.
Rupee depreciation also raises the rupee-denominated cost of oil, amplifying the inflation impact.
India's foreign exchange reserves (~USD 640 billion in early 2026) provide a buffer but not immunity.

Inflation and Monetary Policy

Imported inflation from higher energy costs feeds into the Consumer Price Index (CPI) through fuel, transport, and manufactured goods. The Reserve Bank of India (RBI) must balance inflationary pressure against the risk of slowing growth.

Fuel and light carries a ~6.8% weight in the CPI basket; transport services carry additional weight.
Sustained high energy prices can push headline CPI above RBI's tolerance band (2–6%), constraining rate cut options.
The RBI's Monetary Policy Committee (MPC) must factor in global crude trajectories when framing rate decisions.

OPEC+ Dynamics

OPEC+ is the grouping of OPEC members and non-OPEC oil producers (notably Russia), formed in 2016, that coordinates production levels to manage global oil prices.

OPEC+ collectively controls ~40% of global oil production.
Saudi Arabia and Russia are the two anchor members.
Production decisions at OPEC+ ministerial meetings can significantly swing global crude prices.

Connection to this news: With Hormuz largely closed, spare OPEC+ production capacity cannot easily compensate for the disruption, as the same transit routes are affected. Alternative supply from West Africa, the Americas, and North Sea is limited in quantum.

Key Facts & Data

India's crude import dependence: ~85–88% of total consumption is imported
West Asia share of India's imports: ~60–65% of crude; ~45% of LNG; ~90%+ of LPG
India's SPR total Phase-I capacity: 5.33 MMT (Visakhapatnam 1.33 + Mangaluru 1.5 + Padur 2.5)
Current SPR fill level: ~3.37 MMT (~64% full); approximately 9.5 days of import cover
IEA emergency stock standard: 90 days (India is not an IEA member but aspires to align)
Daily oil flow through Hormuz (2024): ~20 million barrels (~20% of global petroleum)
Urea: over 30% of global urea exported from Gulf countries through Hormuz
Steel: capesize freight rates rose from USD 9.80 to USD 12.20/tonne in early weeks of the conflict
CAD sensitivity: every USD 10/barrel crude rise widens CAD by ~0.4–0.5% of GDP
PPAC (Petroleum Planning and Analysis Cell): nodal body monitoring India's petroleum statistics under Ministry of Petroleum
India's forex reserves: ~USD 640 billion (early 2026 estimates), providing partial buffer
Phase-II SPR expansion: Chandikhol (4 MMT) and additional Padur (2.5 MMT) — government approval in 2021