US-Iran war puts $1.3 billion worth of investments of 800 Indian small companies at risk

A series of joint strikes by the US and Isreal in late February culminated into a regional conflict after Iran started targeting the US allies in the middle east.

• Iran war puts $1.3 billion UAE investment by Indian SMEs at risk
• Retail and hospitality firms face $400 million exposure in UAE
• Most SMEs lack war insurance, increasing vulnerability to losses

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The ongoing Iran war has put capex investment of at least 800 small and medium companies at risk. These companies  had cumulatively invested $1.3 billion in the United Arab Emirates (UAE) in the last six months, data compiled by Moneycontrol showed. The impact would be high on companies from the retail and hospitality sector where 280 Indian companies had invested about $400 million, the Overseas Direct Investment(ODI) data of the Reserve Bank of India (RBI) showed. The development assumes significance as in the last two years UAE has emerged as the second largest ODI destination for Indian companies after the US.

These smaller companies face higher risk than conglomerates that have invested in Middle east, since any adverse impact since they have limited financial power to absorb such losses. Market participants say although the situation in the Middle East is looking bleak in the short term, the long term case for such investments in UAE still stands.

A Mumbai-based coffee roaster named Sub ko Coffee had sent $210,000 to UAE to fund a wholly owned subsidiary. Brahm Lifestyle Products, a lifestyle brand had invested $2 million while another hospitality company Idam Natural Wellness  invested about  $680,000 in UAE earlier this year. While these investments have happened post August-September 2025, RBI doesn’t provide information pertaining to exact date of the transactions.

“Indian SMEs with recent exposure to the UAE are clearly more vulnerable than they would be in a stable operating environment. For Indian SMEs, the biggest exposure is usually not just political risk in the classic sense, but concentration risk. Many smaller firms invest in a single market, depend on a narrow supplier base, or rely heavily on promoter-led execution. In that situation, even a short disruption in cargo movement, customer footfall, remittance timing, or local project execution can have an outsized impact on cash flows,” said Rahul Turki, Partner, Grant Thornton Bharat.

“These companies are likely to face losses and business disruptions due to the war. The bigger risk is majority of these small companies don’t have any active War Insurance policy since such a war impact was considered improbable scenario until three weeks ago," said  Amit Singhania, partner, Areete Law Office.

According to various news reports, strikes and debris were reported near Palm Jumeirah , a Dubai locality where luxury hotels such as Fairmont The Palm are located. In March first week debris from an intercepted Iranian drone caused a minor fire on the outer facade of the iconic Burj Al Arab hotel. However, no specific reports of Indian establishments facing attacks has been reported yet.

The list of companies that sent investment money into UAE in the last six months also includes names such as Graviss Foods, which holds the Baskin Robbins license in India and which sent $11.4 million. Also, FMCGH player Haldiram’s Snack foods remitted $2.8 million to UAE while Oyo Proptech, a subsidiary of Oyo, sent $11 million to the Gulf, data showed.

Despite the short term pain, several companies continue to be bullish on Middle East.

“For Wow! Momo, we have plans to open 100 stores in the Middle East in the next 3–4 years, and I am still bullish on the region as whatever war impact we see will be temporary. In Dubai, business coming from local crowds is going well,  and the impact is on business coming from tourists. It is too early to decide on moving away from the region, and companies will take expansion slow only if tourism is hit in the long run. Whatever the UAE government has done so far is commendable, and very rarely does one see authorities standing at the forefront, so we believe it’s a short-term impact,” said Sagar Daryani President of the National Restaurant Association of India (NRAI) and Co-Founder/CEO of Wow! Momo.

A series of joint strikes by the US and Isreal in late February culminated into a regional conflict after Iran started targeting the US allies in the middle east. Various media reports suggest, UAE has been in the receiving end of over 1,800 Iranian drones during the last three weeks. However, reports so far suggest, most of the drones were successfully intercepted.