US-Israel war with Iran sends oil soaring, raises alarms for India Inc

Indian rupee slid to a record low of ₹92.33 against the US dollar.While oil-marketing companies and air carriers will bear a direct brunt of the higher energy prices, others will face an indirect impact as oil prices feed into their input expenses. The Indian economy could take a hit if the inflationary effect of the conflict dents consumer demand.“India Inc will likely see a partial impact in the March quarter earnings for companies still operating on existing inventories, while the full effect could become more visible in the first quarter of the next fiscal year,” said Pramod Gubbi, founder of Marcellus Investment Managers, a portfolio management firm.If the Strait of Hormuz, through which a fifth of the global oil trade passes, remains closed for 2-6 weeks, it can push the three-month average Brent prices to $80-90, as per analysts at Nomura.

If the conflict stretches longer, this three-month average can jump to even $110 per barrel, they warned.Here is how various sectors will get impacted due to high crude prices:Aviation: Indian carriers, especially IndiGo, are facing a double whammy from the conflict. Not only are fuel prices rising, but closure of key air routes in West Asia is also disrupting operations.

Aviation turbine fuel accounts for 30-40% of airline operating costs, and airlines have limited ability to pass on higher costs, particularly on domestic routes. Analysts at JM Financial estimate that for every $5 rise in Brent, IndiGo’s earnings could fall by about 13%, assuming the rupee remains stable.

Restrictions across Gulf airspaces and major transit hubs such as Dubai International Airport are leading to longer routes, delays and potential cancellations. These hubs connect flights between Asia, Europe