US–Iran conflict clouds outlook for capital goods exporters with West Asia exposure

Dubai

• US-Iran war raises risks for Indian exporters to West Asia
• Strait of Hormuz disruption spikes oil prices, market volatility
• Indian firms encounter delays, rising costs, and order uncertainty

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The war between the United States and Iran, which has engulfed the broader Gulf region, is emerging as a fresh risk for Indian capital goods exporters with exposure to West Asia, analysts have said.

The immediate concern is disruption of the Strait of Hormuz, which has pushed up crude prices and raised global market volatility. The strait carries 20 percent of world’s crude and 50 percent of India’s oil imports.

“Elevated oil prices support fiscal balances, liquidity, and project spending across hydrocarbon-driven economies such as Saudi Arabia, UAE, and Qatar. However, prolonged instability introduces risks around capital flows, execution delays in infrastructure and energy projects, supply-chain bottlenecks, higher freight and insurance costs, and potential deferral of private capex,” said Amit Anwani, Research Analyst at PL Capital (Prabhudas Lilladher).

Project delays, capex worries

Delays in infrastructure projects or deferral of private capex can affect Indian exporters of industrial equipment, power components and engines.

Drone strikes on Amazon Web Services data centres in UAE and Bahrain highlight the risk to private capex in the GCC region.

Capital goods companies supplying equipment or services to West Asia may face near-term volatility, depending on project concentration, contract structures, receivable cycles and on-ground execution risks. A protracted conflict can also slow tender finalisation and defer fresh order inflows as customers reassess project timelines.

Among listed companies, PL Capital noted that Apar Industries has an estimated 5 percent revenue exposure to West Asia and operates a manufacturing facility in the United Arab Emirates (UAE) along with a subsidiary in Saudi Arabia.

Any escalation could lead to logistics disruption, higher freight and insurance costs, and crude-linked raw material inflation, potentially creating near-term margin volatility, the brokerage said.

Cummins India, which exports low-horsepower generator sets and provides services in the region, could also face short-term demand uncertainty.

While oil-driven fiscal strength may support infrastructure spending, increased volatility could weigh on customer decision-making while higher logistics and input costs may pressure profitability, the brokerage said.

Kirloskar Pneumatic, which historically had less than 10 percent exposure to West Asia, is already witnessing delays in oil and gas-related orders from the region, PL Capital said. Further escalation could impact incremental order inflows and execution schedules, the brokerage said.

Conflict adds to trade war woes

For Indian exporters, the risks of supply-chain disruptions and order visibility in West Asia comes at a time when exports have taken a hit from US tariffs.

After India announced trade deals with the EU and the US in recent weeks, exporters were hoping for a better outlook, which now seems to be shadowed by the conflict.

In a Q3 earnings call, Cummins India management said that export demand remains choppy with no clear regional trend. Management flagged geopolitical uncertainty and tariff-related volatility, especially linked to the US.

While US tariff clarity is positive, exports remain hard to predict, prompting greater confidence and focus on domestic growth, it said.

Similarly, Apar Industries said exports were hit by steep US tariffs, sharply reducing Q3 shipments, especially in cables. Management said US order inflows resumed after the price reset but margins remained under pressure, adding domestic demand was offsetting volatility, while export recovery depended on tariff normalisation.