West Asia conflict: The conflict in West Asia is no longer a distant geopolitical event for Indian companies. Nearly three months into the crisis, steel, automobiles, pharmaceuticals, telecom and real estate are dealing with higher freight bills, costlier raw materials, supply delays and softer demand. India Inc has seen external shocks before. This one is different because it cuts across energy, minerals, shipping routes and consumer sentiment at once.
The immediate pressure point is trade logistics. The Strait of Hormuz remains central to the movement of crude oil, petrochemicals and industrial inputs. Even the fear of disruption has raised freight and insurance costs. ICRA has estimated that West Asia accounts for about 14% of India’s exports and 20% of its imports, making the region too important for Indian firms to treat the conflict as a temporary disturbance.
READ | Flat earnings, rising optimism: Unpacking India Inc’s mixed Q2 performance
Energy is the main transmission channel. The petroleum ministry has said about 70% of India’s crude imports are now routed outside the Strait of Hormuz, which gives the country a larger cushion than in earlier crises. But LPG remains exposed. India imports about 60% of its LPG consumption, and about 90% of those LPG imports pass through Hormuz. That distinction matters. Crude supply may be manageable, while LPG and some industrial users remain vulnerable to route disruption.
Freight costs squeeze steel margins
Steel shows how exposed Indian manufacturing remains to imported inputs. Tata Steel Managing Director and Chief Executive Officer T V Narendran has said that 70-80% of the company’s limestone, a key steelmaking input, came from West Asia. The company is now sourcing more from Vietnam, India, Oman and other ASEAN markets to bypass routes exposed to Hormuz risk. That substitution is sensible, but not cheap.
Freight, insurance and fuel costs have climbed together. The steel sector is already facing a 28-30% rise in global freight costs, according to recent industry estimates. For steelmakers, the relevant number is not the mine-gate price of ore, coal or limestone. It is the delivered cost at the plant. That number is now being rewritten by war risk.
The shipping risk is large enough to invite a policy response. Reuters reported in April that India was considering sovereign guarantees for insurers covering vessels travelling in the Persian Gulf. The plan included a $1.5 billion sovereign-guarantee fund to provide reinsurance support and liquidity if insurance costs stayed elevated. That shows the crisis is not only a corporate procurement problem. It has become a maritime-finance problem as well.
Automobile companies face a similar squeeze. Steel and copper prices feed directly into production economics. Eicher Motors and Bajaj Auto have raised prices, while trying to protect demand through internal cost control. The motorcycle segment has already seen deceleration since the March quarter as consumers respond to inflation and income uncertainty.
The choice before companies is unpleasant. Passing on the full cost increase can weaken demand. Absorbing it protects volumes but damages margins. Tata Motors has indicated that it has not fully passed commodity cost increases to customers. That is defensible in the short term. It is not a durable strategy if freight and metal prices remain elevated.
Pharma supply chains face API risk
The pharmaceutical sector has a different vulnerability. India depends heavily on imported active pharmaceutical ingredients, intermediates and solvents. China remains the dominant supplier for several bulk drugs.
The policy problem is well known but unresolved. The Department of Pharmaceuticals told Parliament in March 2026 that, for several APIs, imports from China accounted for 70% or more of India’s total imports in FY2023-24 and FY2024-25. This exposes the limits of India’s bulk-drug localisation push. The production-linked incentive scheme has created capacity, but not yet enough resilience in critical feedstocks.
READ | India Inc delays investment decisions amid uncertainty
Prices of APIs such as paracetamol and azithromycin have risen sharply since the crisis escalated, with some categories seeing 30-40% increases. Industry reports suggest that India has about two months of API stock and four to five months of formulation inventory, giving firms a buffer but not immunity.
The risk is not an immediate shortage of finished medicines. It is the disruption of feedstock flows, containers and working capital for smaller drug manufacturers. Larger firms can carry inventory. Smaller firms cannot. If shipping uncertainty persists, price pressure will travel from APIs to formulations and then to patients.
The shock is not sector-specific. CRISIL Ratings has warned that prolonged West Asia tensions could cut India Inc’s operating profitability by nearly 200 basis points in FY27. It expects corporate credit quality to remain broadly stable because balance sheets are stronger and domestic demand is still resilient. That is reassurance, not relief. A 200-basis-point hit is large enough to hurt investment plans, pricing power and earnings expectations.
Resilience must replace just-in-time efficiency
The policy lesson is not that India can eliminate all import dependence. That would be unrealistic and costly. The lesson is that strategic dependence must be mapped, priced and reduced. Indian manufacturing integrated itself into global supply chains to gain efficiency and lower costs. That model worked when shipping lanes were stable and energy risks were contained. The new environment demands resilience alongside efficiency.
READ | Pink tax hurts women’s income and Indian economy
Companies have begun adapting. Real estate firms are locking procurement contracts earlier to avoid sudden escalation in steel, aluminium, tiles and other construction materials. Some are redesigning projects around locally available inputs. These are not elegant solutions. They are practical responses to a market in which volatility is no longer an exception.
Telecom infrastructure companies are also trying to lower exposure to fuel volatility. Tower operators are accelerating the use of renewable energy and battery-backed systems to reduce diesel dependence. This is often described as a sustainability shift. It is also a cost-control strategy.
Corporate adaptation will not be enough. India has strong domestic demand, healthier bank balance sheets and public capital expenditure. These cushions matter. But they cannot fully absorb imported inflation. Higher freight, fuel and raw material costs eventually show up in corporate margins, consumer prices, monetary policy and household purchasing power.
The government’s response must therefore be sharper than generic calls for self-reliance. Production-linked incentive schemes should be judged by their ability to build domestic capacity in critical inputs, not only by headline investment commitments. Pharmaceuticals, electronics, specialty chemicals, industrial minerals and energy storage need deeper localisation. Trade policy must support alternate sourcing, not merely higher domestic tariffs.
The West Asia conflict has become a stress test for India’s industrial preparedness. Geopolitical risk is now a business variable. Firms that treat it as a temporary disturbance will remain vulnerable. Firms that redesign sourcing, logistics, inventories and energy use will emerge stronger. The test for India is whether policy can move as fast as companies are being forced to.