West Asia crisis may hit trade if disruption persists: Crisil Ratings

A prolonged war in the West Asia 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), such as 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 West Asia 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, 2026, 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 $82-84 per barrel from an average of $66-67 in January-February 2026, while Asian spot LNG prices have surged from about $10 per million British thermal unit to $24-25 per 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 West Asia. 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 West Asia 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 such asairlines 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 West Asia supplies roughly 40 per cent of India’s fertiliser imports and a substantial share of key raw materials such as rock phosphate and phosphoric acid. Higher global prices and rising LNG costs could increase the Government’s fertiliser subsidy burden.

For diamond polishers, the West Asia 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 such as Belgium and Hong Kong may partly mitigate the impact.

In aviation, around 10 per cent of Indian airline flights transit through the West Asia. 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 West Asia destinations, though insurance coverage limits direct financial losses. Demand could shift to alternate destinations such as Southeast Asia.

In the ceramics sector, limited availability of LNG and LPG could force plants to reduce utilisation, while exports — about 40 per cent of sector revenue — may be affected as the West Asia accounts for over 15 per cent of shipments.

For city gas distributors, LNG supply disruptions could mainly affect industrial customers that rely heavily on imported gas, potentially reducing sales volumes.

Meanwhile, sectors such as oil refining, tyres, paints and specialty chemicals may face margin pressure as higher crude-linked input costs may not be immediately passed on to customers.Flexible packaging and synthetic textile producers may see a relatively moderate impact due to improved demand-supply dynamics and partial pass-through of costs.

Potential Beneficiaries: According to Crisil, higher crude prices could benefit upstream oil companies, which may see increased revenues with largely fixed costs. Shipping companies could also gain from higher charter rates amid reduced vessel availability and longer shipping routes.

Crisil also cautioned that further disruptions in key maritime routes, including the Red Sea corridor via the Suez Canal, could amplify the impact on global trade, shipping costs and energy prices. While the immediate impact on most Indian

companies is expected to remain limited due to strong balance sheets, prolonged geopolitical tensions could intensify supply-chain disruptions, sustain high oil and gas prices and increase inflationary pressures. Crisil said it will continue to monitor the developments and assess the credit impact on individual companies.