The Iran-Israel conflict has so far had a limited impact on industry. However, freight rates and insurance premiums will rise if the uncertainties related with it prolong.

So far, the ongoing uncertainties in the Middle East have not had a significant impact on India Inc’s global trade, Crisil Ratings said in a credit alert.

That said, the uncertainties have already impacted global crude oil markets, with Brent hovering in the range of $73-76 per barrel (bbl) over the past one week, up from an average of around $65 per bbl during April-May 2025.

“While this is still lower than the fiscal 2025 average of around $78 per bbl, any escalation of tensions, say, through disruption of energy supply chains, could result in a further spike in oil prices. If crude oil prices continue to be elevated over longer periods, it could impact India Inc’s profits,” the agency warned.

Also, prolonged and increasing uncertainties can result in a rise in air/sea freight cost and insurance premiums for export/ import-based sectors, so will bear watching, it added.

Repercussion of any further significant increase in the crude oil prices from the current levels would vary across sectors that are directly or indirectly exposed to it and impact on profitability will depend on the ability to pass on the cost increase.

Higher oil prices will benefit upstream oil companies because it translates to more revenue, while their costs are fixed.

For downstream oil refiners, operating margins could get squeezed due to higher input cost as they may have limited ability to fully pass on the same through increase in retail fuel prices, Crisil said.

Strait of Hormuz gamble

Yes Securities pointed out that despite repeated threats, particularly during conflicts such as the Iran–Iraq War (1980–1988), the US–Iran tensions post-2011, and the Iran nuclear deal fallout (2018–2020), Iran has never executed a full closure of the Strait of Hormuz, primarily because doing so would be economically and strategically self-defeating.

The presence of the US Naval Forces in the Persian Gulf acts as a strong military deterrent, and any closure attempt would risk severe retaliation, the brokerage added.

Economically, Iran depends heavily on the Strait for its own oil exports and critical imports, making a blockade counterproductive. Moreover, shutting the Strait would harm regional allies like Qatar and Iraq, who also rely on the waterway, potentially straining Iran’s strategic relationships.

It would also violate international maritime law, further isolating Iran diplomatically. As a result, Tehran has historically used the threat of closure as a political lever to influence negotiations, without triggering the high costs of actual disruption, Yes Securities said.

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Published on June 20, 2025