<h2>Executive Summary</h2><ul><li><p>India's import dependence on the Middle East is <strong>not an oil story alone. It is equally a chemical crisis</strong>, with direct consequences for fertilisers, polymers, pharmaceuticals and consumer goods.</p></li><li><p>Aviation turbine fuel prices <strong>more than doubled after the conflict began</strong>, and compounding airspace closures, currency moves and war-risk insurance rendered international operations untenable for Indian carriers without government support.</p></li><li><p>India <strong>imports 85% of its methanol, 75-80% of its ammonia and 90%+ of its LPG from the Middle East</strong>. No alternative supply cluster can absorb those volumes at speed.</p></li><li><p>The <strong>government's duty waiver on 40 critical petrochemical products provides downstream relief</strong>, but risks weakening domestic producers against US and Chinese competition before a June 2026 review.</p></li><li><p>Mining and metals are feeling the pressure through diesel costs, explosive inputs and sulphuric acid supply, all of which feed into electricity tariffs, cement costs and agricultural inputs.</p></li><li><p>A <strong>rapid ceasefire would take 3-6 to restore chemical supply chains to normal</strong>; oil and gas infrastructure damage could extend that timeline further.</p></li><li><p>Businesses <strong>should prioritise liquidity, lock in working capital now and treat downside risks as the base case</strong>. Firms with the balance sheet to act will find assets available at distressed valuations over the coming quarters.</p></li></ul>.<p>Geopolitical risk has a habit of looking manageable until it is not. India entered 2026 with solid fundamentals and a growth trajectory most peer economies envied. The Iran conflict broke in late February, and within weeks the country's exposure to a single trading region became impossible to ignore. That region supplies the bulk of India's crude oil, petrochemical feedstocks, LPG and a range of industrial intermediates. A cross-Forum webinar, moderated by Adit Jain, IMA’s Chairman and Editorial Director, brought together Anil Parashar, President and Chief Executive of InterGlobe Enterprises; Ramkumar Shankar, Managing Director of Sanmar Chemicals; and Siddharth Jain, Strategy Director of Lloyds Metals and Energy, to examine the immediate damage, the medium-term adjustments underway and the longer-run questions the episode has forced into the boardroom.</p><h2>Aviation: Airspace, Fuel and the Cost of Connectivity</h2><p>India's aviation sector entered the Iran conflict already carrying the costs of previous disruptions. The Russia-Ukraine war had closed Russian airspace, adding time and cost to westbound routes. Operation Sindoor shut Pakistani airspace to Indian carriers, adding up to an hour of flying on northern routes at Rs 0.3-0.5 million per aircraft per sector. The Iran conflict then sealed the southern corridor as well, adding 2-2.5 hours to westbound journeys and collapsing Gulf connectivity entirely.</p><p>The cost consequences were severe. Aviation turbine fuel climbed from $89 to $192 per barrel, a rise of over 115%. Currency depreciation added Rs 2.25-2.5 bn annually for every fleet of 100 aircraft. War-risk insurance premiums jumped 10 to 20 <em>times</em>, not merely 10-20 <em>percent</em>. With roughly 80% of airline costs locked into fuel and leases, no carrier could sustain operations without intervention. The government responded with a fuel price cap limiting pass-throughs to 25% of the actual increase, a 25% reduction in landing and parking charges, suspension of fare caps and mandatory free-seat requirements, deferred flight-duty regulations and loan facilities for airlines. Daily Gulf flights fell from around 350 to under 70. The domestic network held, supported by leisure and spiritual travel, while hotels absorbed a 5-10% occupancy drop overall, piped gas supply was rationed to 80% of normal allocation, and the food and dining-out market contracted by around 20%.</p>.<h2>A Chemical Shock: The Deeper Exposure</h2><p>Framing this crisis as an oil shock understates what has happened. Over the past two decades, as peak demand displaced peak supply in energy analysis, Gulf states shifted focus from fuels to chemicals. The region became a central hub for basic building blocks, including methanol, naphtha, ethylene and propylene, and for polymers, including polyethylene and polypropylene. The GCC plus Iran account for roughly 9% of global polypropylene capacity and over 15% of polyethylene capacity. But direct bilateral import figures understate actual exposure: a large share of feedstock exported from crackers in the Middle East, Southeast and Northeast Asian returns to India as processed polymers.</p><p>In terms of specific vulnerabilities, India imports ~3.5 mn tons of methanol annually (MTPA), of which 85% comes from the Middle East; no alternative supplier cluster can absorb that volume. Ammonia imports run at over 2 MTPA, 75-80% sourced from the Gulf; urea imports total around 10 MTPA, with 40% from the same region. (Both inputs are critical at the start of the sowing season.) LPG imports of 20-22 mn tons meet 60-65% of domestic demand, with 90% sourced from the Middle East, serving both 300 mn cooking-gas households and the petrochemical sector that cracks LPG into propylene and ethylene. Sulphur imports of 2 MTPA, 60-65% from the Gulf, matter for fertilisers, metal ore processing and a range of industrial applications. A constraint on one use competes directly with others.</p><p>On logistics, bunker fuel surcharges drove freight rates up 30-50% on affected lanes. War-risk insurance multiplied voyage costs. In extreme cases, voyages were frustrated and cargo offloaded at the nearest safe port at the exporter's cost. Elevated working capital requirements and stock-outs for downstream manufacturers followed as a direct consequence.</p>. <h2>The Government's Response and its Trade-offs</h2><p>In April, customs duties were waived on approximately 40 critical petrochemical products, including methanol, acetic acid, styrene, PVC and anhydrous ammonia, until end-June. The intent was to reduce input cost pressure on downstream industries. The difficulty lies in the design. The two regions least affected by the West Asian crisis are the United States, insulated by shale gas advantages, and China, which uses a coal-to-chemicals route largely decoupled from Gulf feedstock prices. A blanket duty suspension in categories where either or both are major players opens the Indian market to imports at the precise moment when domestic producers face high feedstock costs and disrupted logistics. This is a triple constraint: higher input costs, lower finished-product prices and zero import protection.</p><p>When the June deadline arrives, any extension or redesign of the concessions would benefit from sector-by-sector analysis rather than a uniform instrument applied across a heterogeneous industry. Domestic capacity building has been a stated policy priority; a duty framework that structurally weakens producers of building blocks and intermediates works against that goal.</p><h2>Mining, Metals and the Cost of Energy Inputs</h2><p>The mining sector's exposure is less visible than aviation's or chemicals', but the arithmetic is straightforward. Mining runs on diesel and explosives, and the prices and supply of both have moved sharply. Industrial diesel climbed from roughly Rs 80 to Rs 140 per litre. Diesel's contribution to mining operating costs rose from 30-35% to 48-50%. Explosives are made from ammonium nitrate, which requires ammonia; with the Middle East under constraint, explosive costs followed the same curve, doubling their share of OPEX. Contractors on fixed-rate per-ton agreements faced severe margin compression. State-owned clients, including Coal India and NTPC, moved to enable cost escalation clauses, but the pass-through logic is straightforward: if PSUs do not absorb the cost increase, it flows into the price of thermal power and eventually into consumer electricity tariffs.</p><p>Zinc and copper mining faces a separate complication. Leaching of these metals requires sulphuric acid, and China's decision to ban sulphuric acid exports from 1 May, retaining domestic supply for its agricultural phosphate requirements ahead of the sowing season, removed a major seaborne source. Combined with constrained Middle Eastern sulphur flows, the dual shortage leaves around a quarter of domestic base metal output at risk of input disruption.</p><h2>Macro Conditions: Inflation, Fiscal Space and Growth</h2><p>The macroeconomic transmission of a sustained energy and chemical shock follows a known path. Inventories, hedged positions and existing contracts absorb the initial impact for weeks or months; the adjustment arrives first gradually and then sharply. Every $10 increase in crude oil prices adds $13-15 bn to India's import bill. At the spot prices seen following the conflict's outbreak, from roughly $60 to above $150 per barrel on the Dubai benchmark, the fiscal arithmetic is uncomfortable. A $90-per-barrel increase, annualised, represents a charge of roughly $225 bn against a $4 tr economy. Even partially absorbed through price caps and subsidies, the fiscal deficit will widen, space for government capex will narrow and transfer payments may come under pressure.</p><p>There is a (partly) mitigating consideration to bear in mind: if Gulf producers move to maximise export revenues for reconstruction, India is less than 2.5 days' sailing time away and capable of absorbing large LNG volumes, making it a natural preferred buyer. India's vaccine diplomacy during Covid also appears to have generated goodwill that is now being converted into prioritised supply from Mozambique, Angola and Guyana. These are not structural solutions, but they do ease the immediate constraint. On growth, a reasonable expectation, assuming the conflict does not escalate further, is 6.3-6.5% for the coming year. EBITDA margins across most industrial sectors are expected to compress by 15-18% in the near term. A technical recession remains unlikely under current conditions.</p><h2>CXO Posture: Liquidity, Risk and Selective Opportunity</h2><p>Risks will remain concentrated on the downside for the foreseeable period, and operating assumptions should be calibrated accordingly. Organisations that have not cut discretionary travel, deferred non-critical capex and reviewed working capital lines should act now. Where liquidity can be locked in at current rates, the cost of doing so is lower than the cost of finding it in tighter conditions later. Asset impairments may need to be recognised; they carry no cash outflows, but they require honest balance sheet assessment.</p><p>The other side of the calculus is opportunity. Over the next few quarters, firms with liquidity and risk appetite will find assets at distressed valuations. More structurally, the crisis has sharpened a policy conversation that had been moving slowly: building domestic capacity in critical chemical building blocks, intermediates and feedstocks. Coal gasification, which China implemented at scale a decade ago and which now underpins two-thirds of its domestically produced fertiliser, stalled in India owing to an unresolved dispute between the mining and environment ministries. The current episode has given that conversation new urgency. Rare earth processing, domestic security hardware, ethanol-based chemical pathways and cybersecurity infrastructure all represent sectors where sustained policy direction will generate investment opportunities for firms prepared to act on a 3-5-year horizon. </p><p>For India, the Iran conflict has exposed economic dependencies that were always present but rarely priced as risk. The distance between global supply chains functioning smoothly and those same chains under stress is now visible in fuel prices, chemical costs, airline P&Ls and fertiliser availability. Firms that treat this visibility as a prompt to build supply chain resilience, diversify source origins and embed scenario planning as a board-level discipline will be better placed for the next disruption and for the broader era of geopolitical volatility that appears to be the operating context going forward.</p> <p><em>To access and download the PHDCCI Tourism and Hospitality Resilience Report, please use the button below:</em></p>
<h2>Executive Summary</h2><ul><li><p>India's import dependence on the Middle East is <strong>not an oil story alone. It is equally a chemical crisis</strong>, with direct consequences for fertilisers, polymers, pharmaceuticals and consumer goods.</p></li><li><p>Aviation turbine fuel prices <strong>more than doubled after the conflict began</strong>, and compounding airspace closures, currency moves and war-risk insurance rendered international operations untenable for Indian carriers without government support.</p></li><li><p>India <strong>imports 85% of its methanol, 75-80% of its ammonia and 90%+ of its LPG from the Middle East</strong>. No alternative supply cluster can absorb those volumes at speed.</p></li><li><p>The <strong>government's duty waiver on 40 critical petrochemical products provides downstream relief</strong>, but risks weakening domestic producers against US and Chinese competition before a June 2026 review.</p></li><li><p>Mining and metals are feeling the pressure through diesel costs, explosive inputs and sulphuric acid supply, all of which feed into electricity tariffs, cement costs and agricultural inputs.</p></li><li><p>A <strong>rapid ceasefire would take 3-6 to restore chemical supply chains to normal</strong>; oil and gas infrastructure damage could extend that timeline further.</p></li><li><p>Businesses <strong>should prioritise liquidity, lock in working capital now and treat downside risks as the base case</strong>. Firms with the balance sheet to act will find assets available at distressed valuations over the coming quarters.</p></li></ul>.<p>Geopolitical risk has a habit of looking manageable until it is not. India entered 2026 with solid fundamentals and a growth trajectory most peer economies envied. The Iran conflict broke in late February, and within weeks the country's exposure to a single trading region became impossible to ignore. That region supplies the bulk of India's crude oil, petrochemical feedstocks, LPG and a range of industrial intermediates. A cross-Forum webinar, moderated by Adit Jain, IMA’s Chairman and Editorial Director, brought together Anil Parashar, President and Chief Executive of InterGlobe Enterprises; Ramkumar Shankar, Managing Director of Sanmar Chemicals; and Siddharth Jain, Strategy Director of Lloyds Metals and Energy, to examine the immediate damage, the medium-term adjustments underway and the longer-run questions the episode has forced into the boardroom.</p><h2>Aviation: Airspace, Fuel and the Cost of Connectivity</h2><p>India's aviation sector entered the Iran conflict already carrying the costs of previous disruptions. The Russia-Ukraine war had closed Russian airspace, adding time and cost to westbound routes. Operation Sindoor shut Pakistani airspace to Indian carriers, adding up to an hour of flying on northern routes at Rs 0.3-0.5 million per aircraft per sector. The Iran conflict then sealed the southern corridor as well, adding 2-2.5 hours to westbound journeys and collapsing Gulf connectivity entirely.</p><p>The cost consequences were severe. Aviation turbine fuel climbed from $89 to $192 per barrel, a rise of over 115%. Currency depreciation added Rs 2.25-2.5 bn annually for every fleet of 100 aircraft. War-risk insurance premiums jumped 10 to 20 <em>times</em>, not merely 10-20 <em>percent</em>. With roughly 80% of airline costs locked into fuel and leases, no carrier could sustain operations without intervention. The government responded with a fuel price cap limiting pass-throughs to 25% of the actual increase, a 25% reduction in landing and parking charges, suspension of fare caps and mandatory free-seat requirements, deferred flight-duty regulations and loan facilities for airlines. Daily Gulf flights fell from around 350 to under 70. The domestic network held, supported by leisure and spiritual travel, while hotels absorbed a 5-10% occupancy drop overall, piped gas supply was rationed to 80% of normal allocation, and the food and dining-out market contracted by around 20%.</p>.<h2>A Chemical Shock: The Deeper Exposure</h2><p>Framing this crisis as an oil shock understates what has happened. Over the past two decades, as peak demand displaced peak supply in energy analysis, Gulf states shifted focus from fuels to chemicals. The region became a central hub for basic building blocks, including methanol, naphtha, ethylene and propylene, and for polymers, including polyethylene and polypropylene. The GCC plus Iran account for roughly 9% of global polypropylene capacity and over 15% of polyethylene capacity. But direct bilateral import figures understate actual exposure: a large share of feedstock exported from crackers in the Middle East, Southeast and Northeast Asian returns to India as processed polymers.</p><p>In terms of specific vulnerabilities, India imports ~3.5 mn tons of methanol annually (MTPA), of which 85% comes from the Middle East; no alternative supplier cluster can absorb that volume. Ammonia imports run at over 2 MTPA, 75-80% sourced from the Gulf; urea imports total around 10 MTPA, with 40% from the same region. (Both inputs are critical at the start of the sowing season.) LPG imports of 20-22 mn tons meet 60-65% of domestic demand, with 90% sourced from the Middle East, serving both 300 mn cooking-gas households and the petrochemical sector that cracks LPG into propylene and ethylene. Sulphur imports of 2 MTPA, 60-65% from the Gulf, matter for fertilisers, metal ore processing and a range of industrial applications. A constraint on one use competes directly with others.</p><p>On logistics, bunker fuel surcharges drove freight rates up 30-50% on affected lanes. War-risk insurance multiplied voyage costs. In extreme cases, voyages were frustrated and cargo offloaded at the nearest safe port at the exporter's cost. Elevated working capital requirements and stock-outs for downstream manufacturers followed as a direct consequence.</p>. <h2>The Government's Response and its Trade-offs</h2><p>In April, customs duties were waived on approximately 40 critical petrochemical products, including methanol, acetic acid, styrene, PVC and anhydrous ammonia, until end-June. The intent was to reduce input cost pressure on downstream industries. The difficulty lies in the design. The two regions least affected by the West Asian crisis are the United States, insulated by shale gas advantages, and China, which uses a coal-to-chemicals route largely decoupled from Gulf feedstock prices. A blanket duty suspension in categories where either or both are major players opens the Indian market to imports at the precise moment when domestic producers face high feedstock costs and disrupted logistics. This is a triple constraint: higher input costs, lower finished-product prices and zero import protection.</p><p>When the June deadline arrives, any extension or redesign of the concessions would benefit from sector-by-sector analysis rather than a uniform instrument applied across a heterogeneous industry. Domestic capacity building has been a stated policy priority; a duty framework that structurally weakens producers of building blocks and intermediates works against that goal.</p><h2>Mining, Metals and the Cost of Energy Inputs</h2><p>The mining sector's exposure is less visible than aviation's or chemicals', but the arithmetic is straightforward. Mining runs on diesel and explosives, and the prices and supply of both have moved sharply. Industrial diesel climbed from roughly Rs 80 to Rs 140 per litre. Diesel's contribution to mining operating costs rose from 30-35% to 48-50%. Explosives are made from ammonium nitrate, which requires ammonia; with the Middle East under constraint, explosive costs followed the same curve, doubling their share of OPEX. Contractors on fixed-rate per-ton agreements faced severe margin compression. State-owned clients, including Coal India and NTPC, moved to enable cost escalation clauses, but the pass-through logic is straightforward: if PSUs do not absorb the cost increase, it flows into the price of thermal power and eventually into consumer electricity tariffs.</p><p>Zinc and copper mining faces a separate complication. Leaching of these metals requires sulphuric acid, and China's decision to ban sulphuric acid exports from 1 May, retaining domestic supply for its agricultural phosphate requirements ahead of the sowing season, removed a major seaborne source. Combined with constrained Middle Eastern sulphur flows, the dual shortage leaves around a quarter of domestic base metal output at risk of input disruption.</p><h2>Macro Conditions: Inflation, Fiscal Space and Growth</h2><p>The macroeconomic transmission of a sustained energy and chemical shock follows a known path. Inventories, hedged positions and existing contracts absorb the initial impact for weeks or months; the adjustment arrives first gradually and then sharply. Every $10 increase in crude oil prices adds $13-15 bn to India's import bill. At the spot prices seen following the conflict's outbreak, from roughly $60 to above $150 per barrel on the Dubai benchmark, the fiscal arithmetic is uncomfortable. A $90-per-barrel increase, annualised, represents a charge of roughly $225 bn against a $4 tr economy. Even partially absorbed through price caps and subsidies, the fiscal deficit will widen, space for government capex will narrow and transfer payments may come under pressure.</p><p>There is a (partly) mitigating consideration to bear in mind: if Gulf producers move to maximise export revenues for reconstruction, India is less than 2.5 days' sailing time away and capable of absorbing large LNG volumes, making it a natural preferred buyer. India's vaccine diplomacy during Covid also appears to have generated goodwill that is now being converted into prioritised supply from Mozambique, Angola and Guyana. These are not structural solutions, but they do ease the immediate constraint. On growth, a reasonable expectation, assuming the conflict does not escalate further, is 6.3-6.5% for the coming year. EBITDA margins across most industrial sectors are expected to compress by 15-18% in the near term. A technical recession remains unlikely under current conditions.</p><h2>CXO Posture: Liquidity, Risk and Selective Opportunity</h2><p>Risks will remain concentrated on the downside for the foreseeable period, and operating assumptions should be calibrated accordingly. Organisations that have not cut discretionary travel, deferred non-critical capex and reviewed working capital lines should act now. Where liquidity can be locked in at current rates, the cost of doing so is lower than the cost of finding it in tighter conditions later. Asset impairments may need to be recognised; they carry no cash outflows, but they require honest balance sheet assessment.</p><p>The other side of the calculus is opportunity. Over the next few quarters, firms with liquidity and risk appetite will find assets at distressed valuations. More structurally, the crisis has sharpened a policy conversation that had been moving slowly: building domestic capacity in critical chemical building blocks, intermediates and feedstocks. Coal gasification, which China implemented at scale a decade ago and which now underpins two-thirds of its domestically produced fertiliser, stalled in India owing to an unresolved dispute between the mining and environment ministries. The current episode has given that conversation new urgency. Rare earth processing, domestic security hardware, ethanol-based chemical pathways and cybersecurity infrastructure all represent sectors where sustained policy direction will generate investment opportunities for firms prepared to act on a 3-5-year horizon. </p><p>For India, the Iran conflict has exposed economic dependencies that were always present but rarely priced as risk. The distance between global supply chains functioning smoothly and those same chains under stress is now visible in fuel prices, chemical costs, airline P&Ls and fertiliser availability. Firms that treat this visibility as a prompt to build supply chain resilience, diversify source origins and embed scenario planning as a board-level discipline will be better placed for the next disruption and for the broader era of geopolitical volatility that appears to be the operating context going forward.</p> <p><em>To access and download the PHDCCI Tourism and Hospitality Resilience Report, please use the button below:</em></p>
