The Hormuz hurdle for India Inc
Corporate India had just begun to see earning momentum return. The Iran war now clouds the rosy outlook
Last Updated: Mar 11, 2026, 10:58 IST4 min
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In a Nutshell
- Iran conflict threatens India Inc's earnings and trade outlook
- Oil-linked sectors face margin squeeze due to rising crude prices
- Indian firms' strong balance sheets limit near-term impact
Corporate India began 2026 on a firm footing. Private non-financial companies reported 10.1 percent revenue growth in the December quarter, according to data released by the Reserve Bank of India, as demand steadied after a patchy recovery.
For India Inc bosses, who had been battling weak consumption and volatile input costs, the numbers suggested the earnings cycle was finally turning.
“Listed companies’ profit growth had picked up of late not because margins were better but because revenue growth picked up, which is a very good sign,” says Gaura Sengupta, chief economist at IDFC First Bank. “And even from a consumption perspective, we were seeing wage growth pick up in both urban as well as rural areas.”
Then, West Asia caught fire.
The conflict in Iran has abruptly clouded the rosy outlook for India Inc. “The timing is unfortunate for corporate India,” says Sengupta.
Even if the immediate conflict subsides soon, the structural damage to global trade routes and energy pricing is likely to eat into the margins of companies across sectors.
“I think some 34 percent of listed company expenditure is on power and fuel,” adds Sengupta. “So there will be some impact on Q4 margins but it will be limited because two of the three months in the quarter were stable.”
Sectoral Squeeze
The impact is uneven, with the biggest pressure falling on industries closely tied to oil prices or West Asian trade.
In manufacturing, the “crude-linked” sectors such as paints, specialty chemicals and tyres are bracing for a margin squeeze.
Some 30 percent of the production cost in paints and specialty chemicals is linked to crude oil prices, where competitive intensity and suppressed demand could limit ability to pass on elevated input prices to customers and thereby impact profitability to some extent, according to Crisil.
Tyre makers face a similar challenge. Roughly half of their operating costs are tied to oil derivatives. Historically, these firms have struggled to pass on cost increases to automobile manufacturers without a significant lag.
For ceramics, the pressure comes from two directions. First, disruptions in the availability of LNG and LPG could force many ceramic plants to operate at reduced, or even idle, capacity. Second, exports account for roughly 40 percent of sector revenue, with West Asia contributing more than 15 percent of that share. A slowdown in shipments to the region would weigh on both exporters’ revenue and margins, per Crisil’s estimate.
Impact is also likely on city gas distribution, where LNG imports account for 40 percent of total demand. Margins, though, are expected to be cushioned to some extent, as prices for most alternatives for customers are also linked to crude, which are also expected to see an uptick.
A prolonged rise in oil prices would also pressure gross refining margins of downstream oil refiners.
The timing is particularly perilous for the agricultural sector. Crisil reports that India relies on West Asia for 40 percent of its imported fertilisers.
Prices for imported urea have already surged 20 percent over the past month. This supply shock coincides with a predicted strong El Niño, creating a double worry for the upcoming 2026 Kharif season, according to a note from Kotak Institutional Securities.
Trade-exposed sectors face additional uncertainty. The West Asian markets accounted for about 70-72 percent of India’s roughly 6 million tonnes of basmati exports last fiscal year. Recent developments could disrupt shipments and weigh on near-term trade volumes, though exporters’ relatively strong balance sheets provide some cushion.
Diamond polishers are also exposed. Israel and the United Arab Emirates accounted for about 18 percent of India’s diamond exports in the first nine months of the fiscal year, while roughly 68 percent of rough diamond imports originate from auctions in the two hubs. Any disruption could weigh on trade flows, though alternative centres such as Belgium and Hong Kong—serving end buyers in the US and Europe—offer some relief to a sector already strained by higher US tariffs, according to the Crisil note.
The Resilience Factor
Despite the headwinds, analysts suggest India is better insulated than some of its Asian neighbours.
A Fitch Ratings analysis indicates that Indian utilities, such as GAIL, possess the balance-sheet strength to absorb short-term volatility. Unlike South Korea or Vietnam, India’s power grid relies heavily on domestic coal, leaving it less vulnerable to West Asian gas disruptions.
“The rise in crude oil price will benefit upstream oil companies because they translate to more revenue, while costs are fixed,” according to a March 5 assessment by Crisil.
Additionally, it says, despite a rise in insurance costs, shipping companies are likely to benefit from a spike in charter rates because of the predicament at the Strait of Hormuz, with reduced supply of active vessels and an expected increase in the tonne-mile demand.
The Outlook
For now, the broader impact may be partially cushioned by state-run oil companies.
“A large part of the impact is getting absorbed by the oil marketing companies. But they also enjoyed large margins for a long time on petrol and diesel,” notes IDFC First’s Sengupta. “The rest of the economy is largely shielded.”
The bigger risk lies in how long the disruption lasts.
If the Strait of Hormuz remains a high-risk zone, the resulting freight hikes and insurance premiums will act as a persistent drag on Indian exports and corporate margins.
For the moment, the damage appears manageable.
“The near-term impact on most Indian companies is expected to be limited, given their robust balance sheets,” Crisil notes.
First Published: Mar 11, 2026, 12:03
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