US-Iran war: Fertiliser, cement, auto, tiles among sectors likely to be hit by fuel crisis

The military tussle between the US-Israel and Iran has led to disruptions in the Strait of Hormuz, which is vital for India’s imports and exports. The conflict poses meaningful risks to India’s trade flows, particularly in the form of higher freight costs, supply delays, and uncertainty over energy supplies.

As per ICRA’s analysis, a $10/bbl increase in the average price of crude oil for the year would raise the country’s CAD by 30-40 bps. Besides, this would transmit to CPI and WPI inflation, although the impact on the former would depend on the extent of the passthrough to retail fuel prices. Elevated oil prices and higher inflation would adversely impact consumption demand, it said.

The rising conflict is disrupting major shipping routes, increasing risks for India’s trade with the West Asian countries. India’s heavy dependence on these countries for crude oil and LNG imports makes it particularly vulnerable. On the export side, shipments of apparel, rice and gems and jewellery face delays and higher logistics costs, with perishables and bulk goods most affected.

The fuel shortage has bifurcated Indian equities into two clear camps. Fuel-cost sensitive and gas-dependent sectors face earnings downgrades and operational disruption in the near term. The reversal trade, when it comes, will be sharp but timing that requires watching one variable above all else: when the Strait of Hormuz reopens.

Force majeure from multiple petroleum and LNG entities shall impact players like Petronet LNG, GAIL, Indian Oil Corporation, and Bharat Petroleum, said Tanvi Kanchan, Associate Director at Anand Rathi Share and Stock Brokers. "City gas distributors are facing real-time supply rationing, with the government already intervening to prevent hoarding through emergency booking restrictions,"

Aviation and automobiles are the next tier of pain, the broader aviation sector faces skyrocketing fuel costs alongside Gulf airspace disruptions. Auto companies face crude-linked input cost inflation across tyres, lubricants, and polymers, compounded by weakening consumer sentiment if pump prices eventually rise. Cement is the hidden casualty," Kanchan said.

Overall, ICRA sees a negative impact on airlines, rice, ceramic tiles, diamonds, fertilizers, gas utilities, tea, textiles and tyres.

India imports 65 per cent of the LPG's domestic consumption and imported LNG accounts for 49 per cent of the total natural gas consumed in India, said Sunny Agrawal, Head of Fundamental Research at SBI Securities.

India imports the majority of this gas from West Asia and supply disruption through the Strait of Hormuz will impact key industries/consumers which are dependent on these gas supplies. Disruption in gas supply from the Middle East can impact ceramic tiles, sanitary ware industry, fertilisers, piped natural gas suppliers, gas transmission lines players among others, he added.

Adding to this, market experts fear that the higher oil prices raise transportation costs, push up input prices and add to inflation, which eventually squeezes margins for these businesses. They also believe that higher inflation may delay rate cuts, or even may lead to rate hikes by central banks in the worst case.

The Iran-Israel conflict is beginning to ripple through different sectors in India, but the impact isn’t uniform. On one side, sectors like industrials, building materials, agrochemicals, BFSI, tyres, FMCG and travel could face pressure if crude prices remain elevated, said Shruti Jain, Chief Strategy officer at Arihant Capital Markets.

Sustained volatility in crude prices could create pressure on gross margins across the FMCG sector. Crude and its derivatives constitute a significant portion of raw material costs, particularly for beauty & personal care companies, said Preeyam Tolia, FMCG & Retail Analyst at Choice Institutional Equities.

Kranthi Bathini, Director of Equity Strategy at Wealthmills Securities said that consumer facing sectors will be worst hit, adding to household inflation. QSR space, along with hotel and hospitality space and delivery platforms shall be impacted by shortage of fuel supply. Sectors like cement, fertilizers, auto ancillary, specialty chemicals may also see some impact, he said.

On the contrary, some market experts believe that select defensive pockets and upstream companies also benefit from the rising crude oil prices. Sectors relying on infra push, inelastic demand, commodity play and defence themes are the major beneficiaries in such turbulent times and one can look for opportunities there.

Paresh Bhagat, CIP Veer Growth Fund (AIF), Chairman at Mangal Keshav Financial Services said that Pharma sector is seen a strategic hedge. With a $30.47 billion export base, its strength lies in the 'inelastic' demand for chronic therapies like cardiac and diabetes care. A weaker Rupee provides a natural revenue cushion for export-heavy leaders like Glenmark, Lupin, Wockhardt, and Senores Pharma, helping them offset rising logistics costs, he said.

"Most importantly, we remain unequivocally bullish on the Indian Capital Goods sector, specifically players like ABB and Siemens. The domestic traction in Infra, T&D, and Energy represents a structural shift, not a temporary one. Their massive, long-term order books make them uniquely resilient to the current turbulence in the Strait of Hormuz," he adds.

Upstream oil exploration companies such as ONGC and Oil India usually benefit when crude rises because higher prices improve realizations for producers, said Jain from Arihant Capital. "Defence companies like BHEL and Hindustan Aeronautics also tend to attract investor attention during geopolitical conflicts, as tensions often increase expectations of higher defence spending."