Iran unrest: Limited near-term impact on India Inc, risks rise if tensions escalate: Crisil Ratings

Iran accounts for roughly 4–5% of global crude oil supply, and any escalation that constrains its production or exports could push global prices higher. Given India’s heavy reliance on imported crude, this would raise input costs across multiple sectors.

People hold posters of the Iranian Supreme Leader Ayatollah Ali Khamenei during a funeral ceremony for a group of security forces, who were killed during anti-government protests, in Tehran, Iran, Jan. 14, 2026. (Photo | AP, FILE)

The ongoing unrest in Iran has, so far, had little discernible impact on India Inc’s overseas trade flows or on the credit profiles of domestic corporates. However, a prolonged or intensified conflict could begin to transmit stress through higher crude oil prices, disrupted supply chains, and payment delays, with select sectors more exposed than others, estimates Crisil Ratings.

India’s direct trade exposure to Iran remains marginal. Exports to the country account for only about 0.3% of India’s total outbound shipments, while imports from Iran contribute less than 0.1% of total inbound trade. Basmati rice dominates exports, forming over 60% of shipments to Iran, while imports largely comprise fruits, nuts and small quantities of crude-linked products.

The most significant channel of risk is indirect. Iran accounts for roughly 4–5% of global crude oil supply, and any escalation that constrains its production or exports could push global prices higher. Given India’s heavy reliance on imported crude, such a scenario would raise input costs across multiple sectors. Oil refining, aviation and a range of crude-linked industries, including specialty chemicals, paints, petrochemicals, flexible packaging and synthetic textiles, would be particularly vulnerable. The severity of impact would hinge on each sector’s ability to pass on higher costs to end consumers.

Brent crude prices initially moved above $65 per barrel from below $60 when unrest first surfaced, but have since eased and stabilised at lower levels. This moderation has helped contain near-term pressure on operating costs and margins.

Among export-oriented sectors, basmati rice deserves close attention. Iran is the third-largest destination for Indian basmati rice, accounting for about 13% of total exports in fiscal 2025. However, given that basmati rice is a staple food in Iran, demand is expected to remain relatively resilient even amid economic or political disruptions. Moreover, India’s diversified export footprint across the Middle East, particularly to Saudi Arabia, Iraq and the United Arab Emirates, helps cushion demand risk.

That said, prolonged unrest could complicate logistics and financial flows. Delays in shipments or in payments from Iranian counterparties could stretch the working capital cycle for exporters and increase short-term liquidity pressures, especially for smaller firms.

On the import side, fruits and nuts account for more than 60% of India’s purchases from Iran and represent around 10% of India’s total imports of these products. As these are largely non-essential items, demand is expected to be highly elastic, allowing importers to substitute sources or reduce volumes if disruptions intensify.

An additional risk factor is the possibility of trade-related frictions or tariffs affecting countries perceived to have commercial links with Iran, which could further weigh on Indian exporters.

Overall, while the immediate impact on India Inc remains limited, the situation warrants close monitoring. Any sustained spike in crude prices or escalation in regional tensions could alter the risk profile for select sectors, and credit implications will need to be assessed on a case-by-case basis, said a latest note from Crisil Ratings.