Middle East war could trigger India earnings downgrades, GDP cuts if oil stays above $100: Chakri Lokapriya

India runs a large crude import bill and has deep economic ties with the GCC — which means a sustained move above $100 a barrel is not just an oil story, it is a broad macro problem, he said in an interview to Moneycontrol.

• Elevated crude likely lead to inflationary and margin pressures over Q4FY26 and Q1FY27
• If current Middle East uncertainty persists, GDP growth estimates likely to gradually drift lower
• Expect earnings downgrades to begin emerging, particularly for April quarter

Did our AI summary help?

India’s economic outlook could face fresh pressure if tensions in the Middle East persist, with growth forecasts likely to drift lower and corporate earnings downgrades potentially emerging as early as the April quarter, according to Chakri Lokapriya, CIO–Equities at LGT Wealth India.

In an interview with Moneycontrol, Lokapriya warned that India’s heavy reliance on imported crude and its deep economic links with Gulf Cooperation Council (GCC) economies mean a sustained move in oil prices above $100 a barrel would pose a broader macroeconomic challenge, not just an energy shock.

Inflation, he added, is another key risk to watch. The pressure is not limited to crude prices alone, with rising gas costs, chemicals and supply-chain disruptions feeding into prices simultaneously. According to Lokapriya, a 1 percentage point rise in overall commodity prices could add about 0.22 percentage points to WPI inflation.

What are your expectations from the Q4 earnings season? Do you see any impact of the war on earnings?

Crude oil is expected to remain in the range of $80-90 a barrel in the near term (until the war continues). This will likely lead to inflationary and margin pressures over Q4FY26 and Q1FY27. Additionally, disruption in freight costs could impact export-oriented businesses.

Are you confident about a strong gradual earning recovery despite the ongoing Middle East tensions?

If the current Middle East uncertainty persists, GDP growth estimates are likely to gradually drift lower, and we expect earnings downgrades to begin emerging, particularly for the April quarter.

India runs a large crude import bill and has deep economic ties with the GCC — which means a sustained move above $100 a barrel is not just an oil story, it is a broad macro problem. The concern is less about the immediate price spike and more about duration. Every additional month the conflict persists near $100 a barrel is expected to cost the Centre roughly Rs 30,000 crore in OMC under-recoveries and subsidies — a fiscal drain that compounds quickly if the war drags into Q1FY27.

On the external account, the CAD is expected to widen to ~2% of GDP in FY27E under a sustained $100 a barrel scenario, compared to ~1% in the base case. That is a meaningful deterioration and, one that remains underappreciated by markets currently.

Inflation is the other variable worth watching closely. The pressure is not coming from crude prices alone — gas, chemicals, and supply chain disruptions are all feeding through simultaneously. A 1 percentage point rise in overall commodity prices is expected to add 0.22pp to WPI-based inflation. With multiple commodities moving together right now, the cumulative inflation impulse could be larger than the headline crude number alone implies.

Have valuations become more attractive now, especially after the sharp correction triggered by the Iran War? Do you think the downside is limited from here?

The Nifty 50 usually bottoms out at a P/E of 16.5-17.0x times 1-year forward PE and is currently trading at ~18.7x 1-year forward.

Do you see oil prices stabilizing sooner rather than later?

Even with the release of roughly 400 million barrels from strategic reserves, this represents only about 20 days of supply.

If supply disruptions take 3–4 weeks to stabilize, the market could face production losses of 350 million barrels.

This implies a global shortage of roughly 10–20 million barrels per day, while strategic reserve releases can add only 1–1.5 million barrels per day, suggesting that oil prices are unlikely to ease meaningfully in the near term and stay in the $85-95 range if war continues, more higher to $100 plus if oil supply tightens, and fall to $80 to $85 if oil supply eases.

Do you believe late March could present a good opportunity for Indian Stocks?

Crude oil is expected to remain in the range of $80-90 a barrel in the near term (until the war continues). This will likely lead to inflationary and margin pressures over Q4FY26 and Q1FY27. Additionally, disruption in freight costs could impact export-oriented businesses.

Historical precedent from Russia-Ukraine and Israel-Hamas episodes suggests Indian markets typically recover war-driven drawdowns of 4–8 percent within 20–80 days once de-escalation signals emerge. However, this conflict carries greater macro consequence for India given its elevated Hormuz dependency and the additional complexity of US refinery strikes on Iran — which introduce a longer-dated supply disruption dimension not seen in recent prior conflicts.

Are you buying into pharma and telecom theme?

No, we believe greater opportunity lies in cyclical sectors and the current war presents some select buying opportunities.

Would you advise buying into wires and cables and power sectors which are the key ancillaries to the data centre theme?

The wire companies have run up ahead of the event. However, power utilities and energy companies in thermal and renewable offer good valuations.