Beyond oil and LPG: How Iran conflict is wrecking multiple sectors

Supply shocks

The conflict in West Asia is triggering a chain reaction across supply chains. According to experts, industries are facing three broad categories of impact: shortages of imported raw materials, disruptions to export markets, and uncertainty in fuel and feedstock supplies.

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Shipping disruptions and rising container costs are already affecting the availability of imported inputs. At the same time, European Union regulations such as the Carbon Border Adjustment Mechanism (CBAM) have pushed several industries to explore West Asia as a market, just as geopolitical tensions are destabilising the region.

Energy supply is another major concern. Natural gas and LPG supplies, which are essential for several manufacturing processes, are vulnerable to disruptions due to the conflict and uncertainty along critical maritime routes, such as the Strait of Hormuz.

Industries affected

Several manufacturing sectors have already begun to feel the impact.

In an era of globalisation, what happens in one part of the world affects everyone. The degree of impact may vary, but no economy is immune

The textile sector, for instance, is experiencing a surge in processing costs. Activities such as dyeing, bleaching and finishing are highly energy-intensive. Rising fuel and electricity prices are pushing up operational expenses for textile manufacturers, especially those dependent on energy-heavy processes.

Packaging materials are another pressure point. Plastic-based packaging used by textile exporters has seen prices double in the short term. Industry sources say suppliers are increasingly demanding cash payments due to volatility in raw material prices and supply disruptions.

Packaging costs, which normally account for about 5–7 per cent of total expenses, are becoming a significant burden for manufacturers.

Steel and glass

The steel sector is also facing growing cost pressures.

Coal, a key raw material used in blast-furnace-based steel production, is witnessing supply disruptions due to shipment delays linked to geopolitical tensions. These delays are pushing up input costs for steelmakers, particularly those dependent on imports.

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The glass industry faces a different but equally serious challenge. Glass manufacturing is a continuous process industry that operates around the clock. Furnace operations cannot be stopped without risking severe technical damage and heavy financial losses.

If energy supplies are disrupted or become prohibitively expensive, manufacturers may struggle to maintain continuous production, leading to significant losses.

Export challenges

For exporters, the crisis is already translating into operational and financial strain.

Dr Sahai said exporters are dealing with multiple disruptions simultaneously. Orders are being cancelled or postponed, shipments are delayed and additional surcharges are being imposed on freight.

“In an era of globalisation, what happens in one part of the world affects everyone. The degree of impact may vary, but no economy is immune,” he said.

Some shipments that have already left factories are stuck in ports or storage yards due to logistical disruptions. Others that have already sailed are facing additional charges, making exports more expensive.

Longer shipping routes are another concern. Cargo bound for Europe or the east coast of the United States may need to travel via alternative routes such as the Cape of Good Hope, adding 10–20 days to transit times.

This delay also affects payment cycles. Buyers typically release payments only after receiving goods, which means exporters may face prolonged delays in receiving funds.

MSME concerns

Micro, small and medium enterprises (MSMEs) are particularly vulnerable to such disruptions.

Vinod Kumar said the ripple effect of the crisis is already visible in global trade routes, energy markets and manufacturing supply chains.

“For MSME exporters operating on tight margins, higher freight costs, insurance premiums and longer transit times can seriously erode competitiveness,” he said.

Many MSMEs depend on imported inputs such as chemicals, petrochemical derivatives, metals and plastics that pass through shipping routes linked to West Asian ports. Disruptions along these routes increase costs and create supply uncertainty.

At the same time, volatility in global energy prices is pushing up production costs for many small manufacturers.

Policy response

Despite the challenges, Kumar argued that India is better prepared today than during earlier global crises.

He pointed to stronger policy frameworks, improved logistics infrastructure and government initiatives aimed at supporting exporters and MSMEs. Digital trade platforms, export credit mechanisms and production-linked incentive schemes have strengthened the country’s trade ecosystem in recent years.

Government departments such as the Reserve Bank of India, the Ministry of Commerce and the Ministry of MSME are closely monitoring sectoral stress and may introduce policy measures if required.

However, Kumar stressed that targeted support will still be necessary if the crisis continues. This could include temporary freight support for exporters, improved export credit access and faster trade processing.

Industry resilience

Experts believe India may have a limited buffer period before the crisis begins to have deeper economic consequences.

Dr Sahai noted that India currently has oil reserves that could sustain supply for roughly 90 days even if imports are disrupted. However, natural gas storage capacity is more limited, which could pose challenges for industries dependent on gas supply.

Some manufacturing clusters, such as textile processing hubs and glass manufacturing units, rely heavily on natural gas and could face significant disruption if supply constraints intensify.

At the same time, many MSME clusters still rely on coal or biomass fuels, which may offer some short-term cushioning against energy shocks.

Preparing ahead

Industry leaders say proactive policy measures will be critical to protect businesses if the conflict continues.

Dr Sahai emphasised the importance of maintaining financial stability for exporters and manufacturers. Measures such as credit support, relaxed loan repayment conditions and temporary financial relief could help prevent companies from slipping into distress.

“If companies become financially weak during this period, they may not survive long enough to benefit when the situation improves,” he warned.

Kumar added that India should focus on long-term resilience by diversifying supply chains, strengthening domestic manufacturing of key inputs and reducing dependence on volatile import routes.

Early intervention, he said, would be essential to prevent MSME distress from escalating into widespread closures or loan defaults.

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