US–Israel and Iran Conflict: Impact on different sectors in Indian Market

The weekend escalation between the US, Israel and Iran has triggered sharp reactions across global commodity markets.

Impact on Multi Commodity Exchange of India Ltd

Geopolitical tensions have led to a spike in oil prices and demand for safe-haven assets like gold as well as silver. Oil prices have surged 9–10% in the last week as the US–Israel and Iran war outbreak has caused fear of demand-supply mismatch, especially with threats of the Strait of Hormuz closure.

Multi Commodity Exchange of India Ltd (MCX) is a play on rising volatility and prices of commodities, especially gold, silver and crude. Rising tension in the Middle East, as well as persistent broader uncertainty at the global level, could keep volatility in oil and gold prices on the elevated side.

This shall attract more hedgers and speculators to trade in these commodities, which shall aid trading volumes for MCX. The company derives 95%+ of its revenue from bullion and energy products combined, which majorly comprises oil, gold and silver.

Indian Automotive Sector: Margin Pressures in the Near Term

Geo-political tensions are likely to weigh on margins in the near term. Geopolitical tensions have erupted in the Middle East amid military strikes between key nations.

Ongoing geopolitical tensions/war in the Middle East can potentially lead to a rise in crude prices as well as greater shipping costs for exporters. The situation remains fluid and we shall closely monitor developments in this space.

This is sentimentally negative for domestic tyre players as they use crude derivatives as one of their major inputs. Export-heavy players may have to bear the brunt of high shipping costs amid trade uncertainty.

However, domestic auto volumes have been very robust in the recent past, with the outlook remaining healthy as well, which will protect the downside to a large extent.

Impact of the US–Iran War on the Indian Chemicals Sector

Rising Israel–Iran tensions have increased risks around Gulf shipping routes, particularly the Strait of Hormuz, pushing up raw material prices while raising freight and insurance costs.

For India, this will translate into

• Higher landed costs for imported chemical intermediates
• Shipment delays
• Tighter global supply of key raw materials

For most commodity chemical companies, raw material and solvent prices are based on naphtha, ethylene, benzene and propylene, among others, which are direct crude derivatives.

A prolonged geopolitical issue may lead to

• Higher raw material prices
• Increased freight costs
• Trade delays

This could result in margin compression and limited ability to pass costs through to customers in a demand-weakened environment.

Other Key Developments in Global Oil Markets

Global oil prices have surged sharply after US and Israeli strikes on Iran heightened fears of a wider conflict in the Middle East.

Brent crude jumped about 10% to nearly $80 per barrel in over-the-counter trading and is expected to rise further if tensions escalate, especially if the Strait of Hormuz (a crucial route for global oil and LNG shipments) is disrupted.

Many tanker owners and trading companies have reportedly paused shipments through the strait after warnings, increasing concerns about supply shortages.

The spike reflects market anxiety that prolonged conflict could significantly disrupt global energy supplies and push fuel prices higher worldwide.