PROLOGUE
Following Israel’s attack on Iran has jeopardized the world economy proving that even a regional conflict may result in global aftershocks. The military tension between Israel and Iran provoked by retaliatory strikes has greatly impacted energy prices, financial markets and emerging economies. The growing tension between the two countries has put constraints on India particularly in energy and trade.
WIDER ECONOMIC IMPLICATIONS
India is known to import 80% of its crude oil from the Persian gulf which passes through the Strait of Hormuz, a narrow passage bordered by the Iranian military which makes it very sensitive to global price fluctuations. Any military surge or shutdown would disrupt the crude flow resulting in rising oil prices and increase in India’s import charges. The rise in oil prices doesn’t just show up in macro figures, it directly affects households, businesses and the economy in several ways even pressurising the rupee thus making imports expensive.
SECTORS THAT MAY FACE COST IMPACT
The increased cost may also impact sectors such as Airlines, logistics & FMCG, auto and paint companies. All of these companies would be affected as fuel is the major cost and any impact or decline would also affect the company’s stocks.
Additionally, there are Indian nationals, many of them students residing in Israel and Iran as well. So, a breakout between the two countries would greatly bring damage to the lives of all the civilians including those of Indian origin. And India’s investment in Iran’s Chabarah port which stands a competitor to Pakistan’s port may face regional scab and instability.
CONCLUSION
Despite standing stable in the short term, the Indian markets may face greater risks if the policymakers don’t stay vigilant. For India, the sudden market volatility was manageable but the actual risks lie in oil prices, currency fallback and rising inflationary pressures. Despite the ongoing hinges which puts the world economy to great risk, India must be on guard demanding defence, preparedness and agility.
