On the global economic chessboard, every move is significant. The Iran-Israel conflict is about to reach a decisive moment. How will this geopolitical tango have an impact on India and will the Iran-Israel war affect the Indian stock market? In this article, we will discuss the impact of this conflict on various sectors and stocks in India. Thus, figuring out the Iran-Israel war’s impact on the Indian stock market.

Sectors and Stocks Likely To Get Affected by the Iran-Israel War

1. Oil and Gas Sector

The ongoing tensions between Iran and Israel are likely to have a significant impact on multiple sectors and stocks in India, i.e. which Indian stocks are related to the Israel and Iran war? Among them, one of the sectors that will be affected by the Iran-Israel war is the oil and gas industry, which is likely to be the hardest hit, given India’s heavy reliance on oil imports, with Iran being one of its key suppliers. Any disruption in the oil supply from Iran due to a conflict with Israel could cause a surge in global oil prices, which in turn could impact the Indian oil companies and consumers alike.

India is heavily reliant on oil imports, with Iran being one of its significant oil suppliers. Iran is the third largest importer of India. Any disruption in the oil supply from Iran due to a conflict with Israel could lead to a surge in global oil prices, impacting Indian oil companies and consumers alike. Hence, Indian refineries also face supply issues, and they need to explore other options for importing crude oil. Though the government is continuously keeping an eye on the issue, in the short term, it may cause significant disruption in the oil refinery business. Stocks like Bharat Petroleum, Indraprastha Gas, and Hindustan Petroleum may be impacted adversely.

2. Defense Sector

Another sector that could witness a significant impact is the defence sector. This could lead to heightened demand for the products and services of companies involved in defence production and procurement.

Geopolitical tensions often lead to governments’ increased defence spending. In India, a conflict between Iran and Israel could prompt the government to allocate more resources to bolster its defence capabilities. Companies involved in defence production and procurement, such as Hindustan Aeronautics Limited (HAL) and Bharat Dynamics (BDL), could witness heightened demand for their products and services. One more thing: India imports defence equipment from Iran, and the imports may be difficult in the current scenario. In this case, we can expect this may be an opportunity for Indian Defence manufacturing companies.

3. Pharma Sector

The pharmaceutical sector in India could experience both direct and indirect impacts from a conflict between Iran and Israel. India imports a significant portion of its raw materials for pharmaceutical manufacturing, including active pharmaceutical ingredients (APIs), from various countries, including Iran. Any disruption in the supply chain due to the conflict could lead to shortages of essential raw materials, affecting the production of medicines in India. India is one of the largest exporters of generic medicines globally, and the Middle East is a significant market for Indian pharmaceutical companies. A conflict in the region could disrupt trade routes and logistics, leading to delays in exports and impacting revenues for Indian pharma companies. Companies like Sun Pharma, Dr Reddy, and Cipla may be adversely affected.

4. Infrastructure Sector

Uncertainty in the geopolitical landscape can affect investor confidence and delay infrastructure projects. Companies engaged in infrastructure development, such as Larsen & Toubro (L&T), IRB Infrastructure Developers, and GMR Infrastructure, may experience delays in project execution and face challenges related to funding and regulatory approvals. Stock prices of these companies may be impacted by such uncertainties.

5. Aviation Sector

Oil price fluctuations have a direct impact on the operational costs of airlines. A conflict between Iran and Israel could lead to a spike in oil prices, thereby increasing the operating expenses of Indian airlines. Companies like IndiGo would face margin pressures, potentially affecting their stock prices and profitability. We can also expect a decline in passengers travelling to Middle Eastern countries, which may impact airline companies’ operations.

6. Commodities Sector

During times of geopolitical uncertainty, investors often seek refuge in safe-haven assets like gold and silver. Companies engaged in the production or trading of precious metals, such as Hindustan Zinc Limited and Vedanta Limited, could benefit from an increase in demand for precious metals as investors hedge against geopolitical risks. Stock prices of these companies may witness conflicted movement during periods of heightened geopolitical tensions.

A sneak peek of India’s trade date with Iran and Israel

• Bilateral trade between India and Israel doubled from $5.56 billion to $10.7 billion in the last five years.
• Imports from Israel amounted to $2.3 billion, consisting of space equipment, diamonds, potassium chloride, mechanical appliances, turbo jets, and printed circuits.
• India’s investment in Iran includes the development of the Shahid Beheshti Port at Chabahar, aimed at enhancing connectivity and trade ties with the Middle East and Central Asia.
• India’s trade with Iran has fluctuated, reaching $2.33 billion in 2022-23, with India primarily exporting agricultural goods and livestock products.
• Imports from Iran include items like methyl alcohol, petroleum bitumen, liquefied butanes, apples, liquefied propane, dates, and almonds.

In conclusion, the ongoing tensions between Iran and Israel won’t have much impact on the Indian economy as a whole, as India is focusing more on Make-in-India and Made-In-India products and services. Further, the revenue generated by the Indian establishments in Iran and Israel isn’t much in amount, which couldn’t impact the Indian economy at large. However, it might impact some sectors and their stocks in the short run. Thus, Investors and businesses need to remain vigilant and closely monitor the situation to take appropriate measures to mitigate risks and safeguard their interests in these sectors. Iran-Israel war impact on India – might have a direct and/or indirect impact on some of the sectors during the Iran-Israel conflict, as mentioned in this blog.

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Disclaimer: Investing in the Equity market in India is subject to risks, i.e. the market keeps on fluctuating. This article is purely for educational purposes. The views expressed and data provided here are by Equitypandit’s team. Kindly do not completely depend on the information provided as the risk appetite differs from individual to individual and there are various other factors in the market to determine the factors to invest in the market.