From Russia-Ukraine War to the US-China tariff issue and India-Pakistan clashes, global peace is under pressure. Now, the increasing struggle between Israel and Iran has created new concerns. These incidents not only affect the countries involved, but also affect business partners like India. India is highly dependent on crude oil imports, so such conflicts can have a serious economic impact amid the growing oil price. Oil prices will start touching the sky. The biggest danger is the rise in oil prices. India meets 85% of its oil needs with imports. If the oil prices have increased due to Iran-Israel war, then it will directly affect India’s economy.
According to rating agency ICRA estimates, crude oil prices have increased rapidly due to increasing tension between Israel and Iran. Some fall in the rupee against high prices of crude oil as well as the rupee will increase the pressure on the wholesale price index inflation for June 2025, which estimates the living around 0.6–0.8 percent in June 2025. The rise in oil prices will increase India’s import bill, which will save less money for social welfare schemes with the government. The burden of fuel and fertilizer subsidy will increase, which will increase the current account deficit (current account deficit) and will weaken the price of the rupee. This will also hurt GDP growth
According to an estimation, increase in oil price every $ 10 per barrel can reduce India’s GDP growth by 0.3% and increase in inflation (CPI) by 0.4%.Recently, the Reserve Bank of India (RBI) had cut interest rates after controlling inflation and was expected to cut further at the end of this year but if oil prices increased, inflation could again flare up. This will reduce consumer demand, people will spend less and it will have a significant impact on business.
Impact on Corporate: The surge in oil prices will affect not only the government, but also on companies. As per report of Anand Rathi Share and Stock Brokers it is too early to say how much the effect will be. If the prices are normal quickly, then the companies will not have much difference, but if the battle is long and the oil prices are high, then there will be heavy pressure on the earnings of the corporate.
Impact on Oil marketing companies : If the war between Iran and Israel increased, companies like Indian Oil Corporation, BPCL and HPCL can suffer the most. Increasing oil prices will increase the cost of refining, but these companies will not be able to put this increased cost completely on the customers. This will affect both their earnings and profits.
Even though there may have been relief from retail and wholesale inflation in the month of May, it can be seen in the coming days. The reason for this is Iran-Israel tension, due to which a rapid jump in crude oil prices is being recorded. If crude oil is more expensive, it can bounce in India from freight to manufacturing and other items.
Aviation sector
Aviation Turbine Fuel (ATF) for airlines is one -third of their total cost. Increasing oil prices will increase their cost, which can increase ticket prices. But in the price-sensitive market like India, the demand may reduce the demand by making tickets expensive, which will further pressure the airlines’ earnings.
Paint and chemical industry: Companies such as Asian Paints, Berger Paints and Kansai Nerlac are dependent on oil for raw materials such as solvents and resins. These goods are about 50% of their total cost. If oil prices rise, then these companies may have to increase the prices of their products, which can reduce the demand. Similarly, raw materials such as Naftha, ethane and propane are required to make plastic, synthetic fibers, solvents and chemicals. The cost of companies like Pidilite, SRF, Aarti Industries and Deepak Nitrite will increase, which will affect their profits
Fertilizer and automobile Nitrogen-based fertilizers such as urea and ammonia are used natural gas and oil. LNG prices will also increase due to rising oil prices, which will make fertilizer production expensive. This will either increase the prices of fertilizer or the government will have to bear the burden of subsidy.
Automobile companies will also face rising prices of petroleum-based raw materials like plastic, rubber and composites. This will increase their cost. However, increasing prices of petrol and diesel may increase the demand for electric vehicles (EVS), which can benefit EV manufacturers.
Crisis on business too: India’s trade with Iran and Israel may also be affected by this war. In FY 2025, India exported $ 1.24 billion to Iran and imported $ 441.9 million. Trade with Israel is even bigger, including exports of $ 2.15 billion and imports of $ 1.61 billion.
Prof Mithilesh
Kumar Sinha
Department of Economics
Nagaland University,
Lumami.
Tuesday, July 15, 2025