Two months into the West Asia war, a conflict that triggered the world’s greatest energy crisis, second- and third-order effects are surfacing everywhere, from falling fertilizer output and shortage of Coke cans to rising condom prices. This is a grim reminder of how deeply economic activity is tethered to crude oil and its derivatives.
Beyond its role as a fuel source, crude oil serves as a vital feedstock for manufacturing over 6,000 products. Industries as diverse as healthcare (medical-grade polymers), agriculture (nitrogen-based fertilizers), and technology (circuit board resins) are entirely dependent on petroleum derivatives. It is no surprise that India’s fertilizer production declined 24.6% year-on-year in March amid a shortage of natural gas in the country. As many as 30 sectors, from ceramics to fast-moving consumer goods (FMCG), are expected to be directly or indirectly affected by the energy crisis, shortages of key inputs, and ultimately price rises, an analysis by Crisil showed.
The analysis of the economic impact of the West Asia shock, dated 10 April, assumed the impact period of the war and the return to normalcy of four to five months, an increase in input costs due to a surge in crude oil prices (around $100 in the first quarter of 2026-27 and $85-90 for the entire fiscal), and the rupee to average 92-94 per dollar during the period of disruption.
Sectoral stress
The impact will be varied, with ceramics, fertilizers, and airlines facing high impact on revenue and operating margins, while others may face low-to-medium impact. A stress test analysis by Crisil shows that the fertilizer sector faces a complex ‘high revenue impact’ scenario; urea production could drop by 70% due to gas availability issues, requiring government intervention.
are specifically flagged for a ‘triple whammy’ of travel restrictions, fuel spikes, and rupee depreciation, with a potential operating margin reduction of more than one-third. The most severe impact is reserved for the ceramics sector, which holds a negative credit quality outlook due to its high dependency on LNG and propane; it anticipates a 35% revenue hit and a 50% reduction in operating margins.
Industries such as cement, polyvinyl chloride pipes, and city gas distribution (CGD) face margin pressures due to elevated fuel and input costs. For instance, cement players may see margins impacted by fuel costs, which comprise 15% of revenue. Their ability to switch to coal and leverage strong balance sheets provides a cushion.
Second-order effects such as inflation and dampened consumer sentiment are expected to affect , two-wheelers, and passenger cars, though the latter benefit from very strong balance sheets. Residential real estate and hospitality are bracing for softened demand and rising costs. Industries categorized under a ‘low revenue impact but medium margin impact’ include paints, roads and bridges construction, tyres, and consumer durables, where rising prices for bitumen, crude-linked raw materials like synthetic rubber, and refrigerant gases create significant profitability pressure.
While 22 sectors are shielded by robust financial structures, the evolving conflict continues to pose a measurable risk to the profitability and credit profiles of those with higher exposure to energy imports and discretionary consumer demand.
Strait strain
India’s is deeply dependent on the Strait of Hormuz—a narrow maritime chokepoint (33-39 km wide at its narrowest) connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. About 35-50% of India’s crude imports have come via the Strait in recent years, despite a shift towards Russian crude. While India is still managing to import from the region, the supply has taken a hit. The government has so far prioritized supply to consumers, potentially leaving domestic production sectors to bear the brunt of the war.
Despite ceasefire talks, the West Asia war remains in a state of volatile stalemate. Large-scale bombings have decreased in frequency compared to the initial period of the war, and it has now transitioned into a war of blockades. While transit via the Strait improved in mid-April, it was still only 14% of the pre-war levels until 19 April (latest available data), with uncertainty far from over.
While the Indian government has rushed to secure supplies from other regions, Crisil noted that the longer transit time, potential tanker shortages, pricier crude oil, shipping, insurance, and transit costs will continue to pose a challenge for India in addressing its energy needs. The deep impact of the energy crisis is expected to multiply in India. The wide-ranging sectoral impact could drag growth down, and higher costs due to supply disruptions will push inflation upwards, hitting discretionary demand. Fertilizer shortages may have a severe impact on agricultural activity and is likely worsen the fiscal situation of the government through higher subsidies.
Rupanjal Chauhan contributed to this story.