Iran tensions: Crisil flags crude risk for Indian firms even as trade impact stays ‘minuscule’

Any additional tariffs levied on India due to trade relations with Iran can potentially exacerbate the impact on Indian exporters, it warned.

• Unrest in Iran has not impacted Indian companies or trade so far
• Escalation may affect oil refining, aviation, chemicals, and textiles sectors
• Prolonged unrest could disrupt supply chains and delay payments for exporters

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Domestic credit ratings agency Crisil on Wednesday said the unrest in Iran has not had any impact on Indian companies so far.

However, if the tensions persist or escalate, leading to rise in crude prices, companies in oil refining, aviation and crude-linked sectors like specialty chemicals, paints, petrochemicals and synthetic textiles may be impacted, it said.

"The ongoing unrest in Iran has not had any significant impact on India Inc's global trade, or the credit profiles of domestic corporates thus far," it said.

Pointing out that Iran accounts for over 4 per cent of the global crude oil supply, the agency said any escalation that disrupts its production could spike prices and the same should be watched closely by a country like India that is dependent on imported crude.

"While India's direct dependence on Iran for crude-linked products is low, any sharp rise in crude oil prices will have a cascading impact on sectors such as oil refining, aviation, specialty chemicals, paints, flexible packaging and synthetic textiles," it said.

The extent of impact will depend on the specific sector's ability to pass on the incremental cost, it added.

It noted that Brent crude prices have stabilised at lower levels after spiking by USD 5 per barrel to USD 65 per barrel in the immediate aftermath of the crisis.

The country's direct trade with Iran is minuscule, the agency said, adding that the Gulf nation accounts for 0.3 per cent of Indian exports and less than 0.1 per cent of imports. Over 60 per cent of the exports to Iran is basmati rice, while imports are mostly fruits and nuts, and some crude-linked products.

Iran is the third-largest destination for domestic basmati exporters, accounting for 13 per cent of total exports in FY25, it said.

However, since basmati rice is a staple in Iran, the impact on demand is likely to be limited.

"A prolonged unrest could disrupt supply chains and delay payments from Iranian counterparties, potentially lengthening the working capital cycle for exporters," the rating agency said.

Any additional tariffs levied on India due to trade relations with Iran can potentially exacerbate the impact on Indian exporters, it warned.