Indian Economy Under Pressure as Middle East War Threatens Strategic Oil Corridors and Trade Ties

Indian businesses face rising oil prices and shipping delays as the Middle East war threatens the Strait of Hormuz. See how L&T, Parle, and tech firms are affected.

By: AXL Media

Published: Mar 5, 2026, 3:30 AM EST

Source: The information in this article was sourced from CNA

The Strait of Hormuz: A Vital Economic Pressure Point

Indian commerce is facing a period of severe turbulence as the escalating Middle East conflict threatens the world's most critical energy gateway. The Strait of Hormuz, which handles approximately 20% of global crude and LNG consumption, is a lifeline for the Indian economy. Observers note that roughly 60% of India’s crude imports—nearly 2.7 million barrels per day—pass through this narrow waterway. According to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), a full closure of the strait would not only drive up global prices but could also lead to physical supply shortages, forcing a massive reconfiguration of India's energy strategy.

Consumer Staples and Infrastructure Giants at Risk

The impact of the regional war is already rippling through various corporate sectors. Parle Products, the maker of the globally recognized Parle-G biscuits, warned that rising crude oil prices will inevitably drive up packaging and freight costs. Since the company lacks manufacturing facilities in the Gulf, its exports remain highly exposed to shipping volatility. Meanwhile, infrastructure titan Larsen & Toubro (L&T) is under intense scrutiny; the company derives nearly 40% of its business from the Middle East and employs over 58,000 people in the region. L&T's share price has already plummeted more than 12.5% since late February, reflecting deep investor anxiety over the safety of overseas assets and personnel.

The Oil Factor: Inflation and the Current Account Deficit

Energy security remains the primary concern for New Delhi. Following joint Israel-US strikes on Iran, global crude benchmarks jumped nearly 10%, a shock that threatens to widen India’s current account deficit and stoke domestic inflation. Karthik Nachiappan, a research fellow at the Institute of South Asian Studies, noted that rising petrol and diesel prices will lift manufacturing costs across the board, squeezing household budgets. To cushion the blow, Indian refiners are expected to diversify sourcing toward Russia, North America, and West Africa, though these alternatives typically involve longer routes and higher freight charges.