Uday Kotak warns India to brace for major shock from US-Iran conflict

Kotak Mahindra Bank founder and director Uday Kotak has warned that India must prepare for a major global economic shock arising from escalating tensions in the US-Iran conflict, cautioning that the period of limited impact on markets may be ending.

Speaking at the CII Annual Business Summit 2026, Kotak said the global economic system is entering a volatile phase marked by rising geopolitical fragmentation and uncertainty.

He noted that although the direct economic impact of the Middle East conflict has remained muted over the past few weeks, the situation is likely to change sharply.

“We haven’t seen the impact of the war in two months, but now it’s coming, and it’s coming big,” Kotak said, urging businesses and policymakers to prepare for sudden disruptions.

He warned that unless the Iran conflict de-escalates immediately, India could face significant external shocks in the near term.

Kotak described the current global environment as a shift away from cooperative internationalism toward a more fragmented “tribal” world order, where nations increasingly compete for control over trade routes and strategic assets.

He highlighted vulnerabilities around critical maritime routes such as the Strait of Malacca, noting that disruptions in such chokepoints can have far-reaching economic consequences.

The veteran banker also pointed to India’s sensitivity to oil price fluctuations, warning that a rise in crude prices could significantly widen the country’s current account deficit.

According to Kotak, India’s CAD remains manageable at lower oil prices, but could widen sharply if crude rises to around $100 per barrel.

He urged India Inc. to adopt a “prepare for paranoia” approach, calling for proactive economic adjustments rather than reactive crisis management.

Kotak concluded by stressing the need for a low-cost structural reshaping of the economy and greater coordination between businesses and policymakers to navigate the uncertain global environment ahead.