It’s Day 6 of the Iran war. The fighting continues unabated; on Wednesday, a ballistic missile fired from Iran and heading into Turkish airspace was destroyed by Nato air and missile defence systems in the eastern Mediterranean Sea. Moreover, Saudi Arabia said it had yet again intercepted another drone attack from Tehran.
Other parts of West Asia also remain on the boil. There are also worries about the spillover of the war in the
Strait of Hormuz, one of the world’s most critical energy chokepoints, prompting a surge in oil prices.
As this war rages on, India is expected to feel the heat indirectly, as many items used by the common man are set to get pricier.
Petrol and diesel
Six days into the Iran war, the price of oil has already seen a surge with Iran choking off the Strait of Hormuz, through which a fifth of the world’s crude and considerable liquefied natural gas (LNG) supplies travel. Additionally, Iran has been taking aim at oil refineries across West Asia; earlier, it struck the
Ras Tanura refinery in Saudi Arabia, forcing a temporary closure.
All of this has resulted in oil prices surging, up almost 20 per cent since last Friday. Brent crude, the international benchmark, was trading at $83.07 per barrel on Wednesday. This has led to concerns that the price of petrol and diesel in India will rise considerably, as 88 per cent of its crude oil demand is met through imports.
But for now, India seems to be protected from the oil price surge. As per a PTI news report, retail petrol and diesel prices in India are not expected to be revised upward in the immediate future.
Moreover, should the Strait of Hormuz continue to be blocked, India has a Plan B: the
Cape of Good Hope. However, this will result in longer transit durations and higher transportation expenses, along with increased freight and insurance costs.
Edible oil
Along with petrol and diesel, edible oil is also set to get pricier in India.
BV Mehta, Executive Director of the Solvent Extractors’ Association of India (SEA), told Businessline that India’s edible oil supply is significantly dependent on imports. Palm oil is sourced primarily from Indonesia and Malaysia, while soybean oil is imported from Argentina, Brazil, and the US, and sunflower oil from Russia and Ukraine.
A substantial portion of these shipments transits through the Strait of Hormuz and the Suez Canal. Any disruption or blockage of this critical maritime route could affect supply continuity and lead to short-term volatility in availability and prices, particularly for sunflower oil.
Moreover, an increase in global crude oil prices has pushed up freight and insurance costs, both internationally and domestically. This will raise the landed cost of edible oils and exert upward pressure on domestic prices.
In fact, the price of edible oil has already seen an increase. According to the Department of Consumer Affairs data, the all-India average retail price of sunflower oil, soybean oil, and palm oil in packed form increased by Rs 1-3 per kg as on March 3 as compared to the previous day.
Vegetables and grocery items
The Iran war is also expected to impact the prices of many Indian food staples, such as pulses and vegetables. Suresh Agarwal, president of the All India Dal Mill Association, told the Economic Times, “If the war continues beyond a week, the price of pulses will increase.”
That’s because India imports about five-six million tonnes of pulses, including tur, urad, and other lentils, per year from Myanmar, Canada, and Africa. A rise in logistics costs will affect the landing price of lentils.
Apart from lentils, the price of vegetables is also expected to rise. The import of nuts and dried fruits will also be impacted, resulting in a surge in prices. India imports figs, almonds, pistachios, raisins, saffron, and apricots from Iran and Afghanistan. Both these countries are embroiled in fighting — Tehran with the US and Israel, while Kabul is in battle with Pakistan.
Vijay Bhuta, president, Mumbai Dryfruit and Date Merchants Association, told Times of India, “Supplies of dry fruit and nuts may be entirely halted in the coming future. Already, dispatches from Afghanistan are being routed through Iran’s port since direct shipments via the Wagah Border in Amritsar were halted in the wake of the India-Pakistan conflict. The closure of this lone Iranian route will choke off arrivals completely.”
Fertiliser and farm products
West Asian fertiliser exports are facing disruption due to war, per MarketWatch. Further, with oil and gas prices on the rise, farm equipment will become more expensive to use, thereby raising the price of agricultural products.
Airfare and travel expenses
The Iran war engulfing West Asia has cleared the region’s skies, forcing
airlines to make drastic rerouting plans and leaving a massive void in usually busy global airspace.
With Israel and the US bombing Iran day after day – and Tehran responding with waves of missiles and drone attacks – airlines have been forced to divert their passenger jets away from the Gulf or risk a catastrophic accident.
As of March 3, Flightradar24 noted that a total of 12,300 flights had been cancelled, including at major transfer hubs such as Dubai and Doha.
Aviation experts note that airspace disruptions and longer flight routes to avoid conflict zones will push up airline operational expenses. Higher fuel consumption and insurance premiums could also lead to a rise in ticket prices. International travel, especially to Europe and West Asia, may soon become more expensive for Indian flyers.
Plastics
Plastic, which is derived from oil, is also expected to see a price rise. In fact, plastic granules, which are made from crude oil, have already risen by up to 12 per cent in just two days. This may increase the cost of plastic-based goods across industries.
Pharmaceuticals
Experts also note that disruptions in supply chains will also impact pharmaceuticals in India, making medicines more expensive.
India relies on China for many active pharmaceutical ingredients (APIs) but depends heavily on Europe for high‑end key starting materials (KSMs) and specialty chemicals. “Potential delays in these imports can stall the production of complex generics and value‑added medicines,” said an industry insider to Moneycontrol.
Moreover, a weakening rupee and rising crude prices could push up costs of petrochemical‑derived solvents and chemical intermediates, inputs that are essential to drug manufacturing.
All in all, it seems that the Iran war will become a costly affair for India.
With inputs from agencies
End of Article
