India is currently facing the challenge of maintaining economic stability amid rising global tensions, as the US-Iran war has triggered a sharp surge in energy and crude oil prices, directly impacting the common man’s pocket. The conflict has disrupted the supply of essential commodities such as oil, LPG, urea, and packaging materials, leading to rising inflation and making everyday life more expensive.
Let us understand in detail the impact of the US-Iran war on India and the challenges it is creating for ordinary Indians and various sectors of the economy.
What’s Happening?
The ongoing Iran war in the Middle East has now gone beyond being just a geopolitical crisis; its impact is clearly visible in the monthly budgets of common people. Due to the conflict, the Strait of Hormuz has been severely affected, through which nearly 20% of the world’s oil and energy supply passes. Almost 90% of India’s LPG imports also move through this route. Additionally, attacks on Saudi Aramco’s Ras Tanura refinery and Qatar’s Ras Laffan LNG plant have further increased pressure on the supply chain.
India’s dependence on LPG imports increased from 56% in FY21 to 59% in FY25.
India imports nearly 60% of its total LPG requirement, mainly from Qatar, the UAE, Saudi Arabia, and Kuwait. Due to disruptions in supply, the shortage of domestic LPG in the country has increased, forcing the government to impose restrictions on commercial supply while prioritising household consumption. This has directly impacted commercial LPG prices, which have risen sharply. Increasing freight costs, insurance premiums, and petrochemical prices have not only made gas more expensive but have also raised the cost of furniture and several everyday-use products.
Impact of the War Has Now Reached Common People’s Budgets
The impact of the Middle East conflict is now clearly visible in the daily expenses of Indian households. The price of domestic LPG cylinders has increased from Rs 853 to Rs 913, while commercial cylinders have surged from Rs 1,768 to Rs 3,071.50. Cooking oil prices have also risen sharply, with sunflower oil becoming nearly Rs 15 per litre more expensive and mustard oil around Rs 10 per litre costlier. The prices of pulses, dry fruits, and sweets are also increasing rapidly. Mamra almonds have become costlier from nearly Rs 1,800 to Rs 2,800 per kg, while Iranian pistachios have risen from Rs 1,650 to Rs 2,400 per kg.
In addition, furniture, paints, electronics, and clothing have also started becoming more expensive. Foam prices have risen by nearly 45%, while packaging costs have increased by around 70%. Air conditioners, televisions, and refrigerators are expected to witness price hikes of 5-6%. The medical sector is also under pressure, with medical-grade plastics becoming 50-60% more expensive. Alongside this, the weakening rupee has made foreign education and international travel costlier. The uncertainty created by the war also triggered a decline in the stock market, impacting investors’ wealth by nearly Rs 34 lakh crore.
Impact on the FMCG Sector and Price Increases
FMCG companies are facing inflationary pressure linked to crude oil and a 60-70% increase in packaging costs. Dabur has implemented a 4% price hike and reduced grammage in smaller packs. Godrej Consumer Products has raised prices by 5% in soaps, 6-7% in detergents, and up to 7% in household insecticides. Britannia, Marico, HUL, Pidilite, and several other companies are also preparing for phased price increases and grammage adjustments.
Packaging costs account for nearly 15-20% of total production expenses. Long-term contracts are gradually being replaced by daily price revisions. Companies are now focusing on alternative sourcing and local procurement, though margins may still face pressure of 100-250 basis points. However, rural demand is showing signs of improvement, even as consumers remain cautious with spending.
What Does This Mean for Investors?
This entire development highlights that geopolitical tensions are not limited to oil prices alone but can impact the broader economy and corporate margins. Rising raw material costs, freight charges, and a weaker rupee may increase pressure on sectors such as FMCG, paints, automobiles, textiles, pharmaceuticals, and consumer durables. Many companies are now considering price hikes or reducing pack sizes, which could eventually affect consumer demand.
However, during such periods, sectors linked to energy, defence, and commodities may perform relatively better. For investors, this is a time to focus not just on momentum-driven opportunities but on companies with strong pricing power, healthy balance sheets, and the ability to manage rising costs effectively.
What’s Next?
The duration of the war will largely determine its impact on India’s economic growth. If the conflict continues for a prolonged period, inflation could rise further, consumer demand may weaken, and India’s growth rate could decline by up to 1%. India’s forex reserves currently stand at $716.81 billion, providing import cover for nearly 11 months.
On the other hand, if the war comes to an end, oil prices could fall below $100 per barrel, and India’s growth rate may recover to around 7.5%. The government is also working on indigenous alternatives such as DME and long-term solutions like undersea pipelines. Meanwhile, FMCG companies are focusing on cost control, portfolio optimisation, and operational efficiency to navigate the challenging environment.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
