Daily Voice: Prolonged Iran war may make 2026 tough for global economy, says Vikas Gupta

Vikas Gupta is the CEO and Investment Strategist at OmniScience Capital

• Prolonged Iran war may push Brent crude to $150 a barrel
• 2026 to be tough for global economy if Iran war stretches for too long
• Most domestically oriented industries won't be impacted much in revenue terms

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"The $150 a barrel price for Brent crude oil is a possibility if the US-Iran war stretches for too long," said Vikas Gupta, the CEO and Investment Strategist at OmniScience Capital, in an interview with Moneycontrol.

According to him, 2026, at this stage, looks tough for the global economy; however, a quick resolution to the war, on the other hand, could bring a huge sigh of relief.

He believes most domestically oriented industries will not be affected much in terms of revenue growth. Margins for many companies could be impacted, thus resulting in slower earnings growth.

Do you see Brent crude oil prices hitting $150 a barrel soon if Middle East tensions deepen further?

It is a possibility if the war lasts too long. Another likelihood is that if oil prices remain elevated for long, other sources, including significant Russian oil is likely to come into the market. Additionally, non-OPEC sources from South America can also add to the supply. But temporarily, such prices are possible.

Do you expect the West Asia tensions to hit the global economy hard in the current year?

The whole issue is how long the war is likely to last. The longer it lasts, the harder it hits the global economy. The location is at the heart of the global trade routes from producer countries in the east to consumer countries in the west. Using other routes is possible, but it adds to the costs. Further, oil itself is a core commodity driving inflation across the global economy.

So, 2026, at this stage, looks tough for the global economy. A quick resolution, on the other hand, could bring a huge sigh of relief. But keep in mind that domestically-oriented companies are likely to be able to pass on the inflated prices to consumers without a significant demand reduction. However, exporters are likely to face challenges due to increased prices.

Do you see a strong possibility of an equity market uptick if the Strait of Hormuz issue gets resolved?

The Strait of Hormuz is casting a huge shadow on potential future inflation. The surging Oil and LNG prices are both are likely to result in imported inflation for India. The resolution of the Hormuz issue will definitely be a positive signal for the markets. But without resolution of the ongoing war, it does not signal full market optimism.

Apart from oil and gas, do you see any major risks for Indian equity markets from the US–Israel–Iran conflict?

The movement of goods as well as people is getting impacted. This will result in friction in the trade of goods and services. This works adversely for the USDINR and thus impacts everything to some extent. Oil & gas prices impact chemicals, paints, fertilizers, and so on. So several industries get impacted.

However, most domestically oriented industries will not be impacted that much in terms of growth in revenues. Margins for many companies could be impacted, thus resulting in slower earnings growth.

If the Iran conflict continues, do you expect significant commodity-price-led margin compression across sectors?

As mentioned in the earlier point, due to the trade bottlenecks, a wider commodity price escalation on a sustained basis would result in margins getting impacted even for domestically oriented companies, and thus is not optimal for earnings growth.

However, if demand is very strong, the margins could be maintained for some industries where companies might be able to increase prices. This will, however, result in the escalation of inflation across the economy.

What could be the possible impact of the Iran conflict on Q4 earnings and economic growth?

Our analysis and opinion is towards the side of demand being maintained and thus revenue growth being intact for most sectors. However, margins being impacted, the earnings growth could be muted.

Is this the right time to start accumulating quality stocks?

The typical quality stocks are still very expensive in our analysis. Most FMCGs, which are considered quality, are still trading at a PE of 50+, while these companies typically have earnings growth ranging from mid-single digits to low double digits. A 50+ PE is justified for a company growing at 20%+ for mid to long term.

Are you bullish on the data centre ecosystem theme?

We are bullish on the potential growth of data centers. However, it will be difficult to find a data center ecosystem company that is mispriced. However, surprisingly, the main bottleneck for data center growth, which we have been discussing for nearly 2 years, is the power supply.

The power generation ecosystem has many mispriced companies. However, these are consistently being ignored, and we are extremely happy to have this opportunity to play this high-growth, inevitable growth vector of data center and AI via these severely mispriced power companies.

Do you believe AI-led disruption is already priced into IT stocks?

AI-disruption is still being priced in. The impact is actually bi-directional. While the traditional people-led time & material model is likely to be hugely impacted negatively, AI is also a huge growth opportunity. The challenge is to estimate the negative revenue impact from the reduction in time & material billing and parallelly estimating the positive impact from AI-related projects, which are likely to grow exponentially over the next 3-5 years.

Based on the current uncertainty, the IT companies need to fall a little bit lower before becoming attractive for our framework.