Shock averted: West Asia truce just saved India Inc from a massive profit hit
Oil Marketing Companies (OMCs) and fertilizer manufacturers are driving this rebound. OMCs are projected to post operating profits for the fiscal year despite sustaining ₹40,000-45,000 crore in net under-recoveries between March and May, as per the CRISIL report.
- Jun 25, 2026,
- Updated Jun 25, 2026 9:37 PM IST
A swift sequence of diplomatic developments in West Asia has altered the fiscal trajectory for corporate India. First came a tenuous, non-binding memorandum of understanding between the United States and Iran.
Then followed the highly anticipated reopening of the Strait of Hormuz. Energy markets reacted immediately, sending crude prices downward and fundamentally softening the economic headwinds building against domestic industries. This sudden diplomatic breakthrough has effectively halved the projected profitability damage to corporate India.
According to the latest analysis by CRISIL Ratings, the impact on operating margins will be contained at approximately 100 basis points. This is a sharp improvement from the 200 basis points compression feared just a month ago under a prolonged conflict model. Median operating margins are now expected to settle at 11% this fiscal year, compared to the pre-conflict estimate of 12%.
A 2-speed supply recovery
While Brent crude prices have corrected to an expected fiscal average of $80-85 per barrel, underlying supply chains are recovering at a slower, more uneven pace. Structural disruptions linger; shipping transits remain well below baseline levels, and natural gas supply disruptions are expected to stretch across four months of the fiscal year.
"The recent sharp correction in crude oil prices and likely normalisation of gas supplies are beneficial for India Inc as that would ease cost pressures meaningfully," Subodh Rai, Managing Director at CRISIL Ratings, said. "If the armistice sustains, two-thirds of the 34 sectors will see minimal disruption, with margin recovery in the second half mostly offsetting pressures of the first half. But the risk of conflict escalation persists, so we foresee corporate India staying cautious and continuing to focus on supply-chain diversification," he added.
Sectoral performance divide
CRISIL's evaluation of 34 sectors, representing 65% of rated corporate debt, underscores a stark operational divide. For 24 of these sectors, revenue and margin hits will be minor, with financial recoveries heavily backloaded to the second half of the year.
Oil Marketing Companies (OMCs) and fertilizer manufacturers are driving this rebound. OMCs are projected to post operating profits for the fiscal year despite sustaining ₹40,000-45,000 crore in net under-recoveries between March and May. Concurrently, the central fertilizer subsidy outlay has dropped to ₹2.4-2.6 lakh crore — a ₹15,000 crore reduction from prior stress projections.
Conversely, 10 sectors face a direct margin squeeze of one-tenth to one-third relative to pre-conflict baselines. Six of these sectors — polyester textiles, auto components, diamond polishers, flexible packaging, specialty chemicals, and airlines — hold a moderately negative credit quality outlook due to heightened working capital requirements and moderate balance sheets.
Airlines face prolonged strain from restricted pricing power and currency fluctuations, while ceramics manufacturers are battling lower capacity utilization driven by early-quarter fuel costs.
Policy shock absorbers & Looming macro risks
A substantial policy cushion is absorbing some of this friction. The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 provides ₹2.55 lakh crore in credit support to MSMEs and vulnerable segments, including ₹5,000 crore earmarked specifically for airlines. As of June 9, 2026, the Ministry of Finance has approved more than ₹48,000 crore in guarantees.
Even with energy pressures abating, two significant macro variables continue to temper optimism for domestic growth. The non-binding nature of the US-Iran truce keeps geopolitical escalation risks active, while the arrival of El Niño conditions threatens agricultural output and domestic rural demand.
"The correction in crude oil prices and the gradual easing of both shipping-related costs and gas supplies provide timely relief to India Inc," Somasekhar Vemuri, Senior Director at CRISIL Ratings, noted.
"While supply-side pressures are expected to abate, the geopolitical situation in West Asia remains fluid and escalation risks persist. Nevertheless, softer crude prices would support the government's ability to sustain its capital expenditure push and respond to any demand-side impact. This becomes particularly relevant as El Niño poses risks to the monsoon and, in turn, domestic rural demand," Vemuri added.
A swift sequence of diplomatic developments in West Asia has altered the fiscal trajectory for corporate India. First came a tenuous, non-binding memorandum of understanding between the United States and Iran.
Then followed the highly anticipated reopening of the Strait of Hormuz. Energy markets reacted immediately, sending crude prices downward and fundamentally softening the economic headwinds building against domestic industries. This sudden diplomatic breakthrough has effectively halved the projected profitability damage to corporate India.
According to the latest analysis by CRISIL Ratings, the impact on operating margins will be contained at approximately 100 basis points. This is a sharp improvement from the 200 basis points compression feared just a month ago under a prolonged conflict model. Median operating margins are now expected to settle at 11% this fiscal year, compared to the pre-conflict estimate of 12%.
A 2-speed supply recovery
While Brent crude prices have corrected to an expected fiscal average of $80-85 per barrel, underlying supply chains are recovering at a slower, more uneven pace. Structural disruptions linger; shipping transits remain well below baseline levels, and natural gas supply disruptions are expected to stretch across four months of the fiscal year.
"The recent sharp correction in crude oil prices and likely normalisation of gas supplies are beneficial for India Inc as that would ease cost pressures meaningfully," Subodh Rai, Managing Director at CRISIL Ratings, said. "If the armistice sustains, two-thirds of the 34 sectors will see minimal disruption, with margin recovery in the second half mostly offsetting pressures of the first half. But the risk of conflict escalation persists, so we foresee corporate India staying cautious and continuing to focus on supply-chain diversification," he added.
Sectoral performance divide
CRISIL's evaluation of 34 sectors, representing 65% of rated corporate debt, underscores a stark operational divide. For 24 of these sectors, revenue and margin hits will be minor, with financial recoveries heavily backloaded to the second half of the year.
Oil Marketing Companies (OMCs) and fertilizer manufacturers are driving this rebound. OMCs are projected to post operating profits for the fiscal year despite sustaining ₹40,000-45,000 crore in net under-recoveries between March and May. Concurrently, the central fertilizer subsidy outlay has dropped to ₹2.4-2.6 lakh crore — a ₹15,000 crore reduction from prior stress projections.
Conversely, 10 sectors face a direct margin squeeze of one-tenth to one-third relative to pre-conflict baselines. Six of these sectors — polyester textiles, auto components, diamond polishers, flexible packaging, specialty chemicals, and airlines — hold a moderately negative credit quality outlook due to heightened working capital requirements and moderate balance sheets.
Airlines face prolonged strain from restricted pricing power and currency fluctuations, while ceramics manufacturers are battling lower capacity utilization driven by early-quarter fuel costs.
Policy shock absorbers & Looming macro risks
A substantial policy cushion is absorbing some of this friction. The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 provides ₹2.55 lakh crore in credit support to MSMEs and vulnerable segments, including ₹5,000 crore earmarked specifically for airlines. As of June 9, 2026, the Ministry of Finance has approved more than ₹48,000 crore in guarantees.
Even with energy pressures abating, two significant macro variables continue to temper optimism for domestic growth. The non-binding nature of the US-Iran truce keeps geopolitical escalation risks active, while the arrival of El Niño conditions threatens agricultural output and domestic rural demand.
"The correction in crude oil prices and the gradual easing of both shipping-related costs and gas supplies provide timely relief to India Inc," Somasekhar Vemuri, Senior Director at CRISIL Ratings, noted.
"While supply-side pressures are expected to abate, the geopolitical situation in West Asia remains fluid and escalation risks persist. Nevertheless, softer crude prices would support the government's ability to sustain its capital expenditure push and respond to any demand-side impact. This becomes particularly relevant as El Niño poses risks to the monsoon and, in turn, domestic rural demand," Vemuri added.