Middle East Crisis Risks $100 Billion Economic Shock to Indian Households: Impact on LPG, Remittances, and More
Eight days into the escalating conflict involving Israel, the United States, and Iran, Indian households are beginning to feel the effects. The ongoing crisis is impacting various sectors, including cooking gas prices, remittances, and supply chains.
Nearly half of India’s crude oil imports, along with a significant portion of its liquefied natural gas (LNG) and liquefied petroleum gas (LPG), typically transit through the Strait of Hormuz. This crucial global energy route has been disrupted due to the ongoing conflict, leading to widespread consequences that extend from global energy markets to household expenses in India.
Deep Economic Links Beyond Oil
India’s economic ties with West Asia are extensive and not limited to energy supplies. The region serves as a major trade partner and a vital source of remittances. Approximately 10 million Indians reside and work in Gulf countries, sending billions of dollars home annually. This financial support is crucial for millions of families and significantly contributes to India’s external finances.
According to brokerage firm Jefferies, West Asia accounts for 17% of India’s exports, 55% of its crude oil imports, and 38% of remittances. In 2025, India imported goods worth approximately $98.7 billion from the region, including energy, fertilizers, and key industrial inputs. Should the conflict persist, India may face disruptions across multiple fronts, including energy supplies, supply chains, and remittance inflows.
Government Says Energy Situation Is ‘Comfortable’
Currently, the Indian government has adopted a cautious “wait and watch” approach regarding the situation. Officials assert that the country remains in a “comfortable position” concerning energy security, with supply levels under continuous review. They emphasize that only about 40% of India’s crude imports pass through the Strait of Hormuz, with the remainder sourced via alternative routes. Authorities also indicate that there is no global shortage of crude oil, LNG, or LPG, and India continues to procure supplies from various partners.
Oil and Gas: Immediate Risks
Despite these reassurances, energy remains an immediate concern. India imports nearly 90% of the crude oil it consumes, with about 2.5 to 2.7 million barrels per day typically transported through the Strait of Hormuz from countries such as Iraq, Saudi Arabia, the UAE, and Kuwait. Jefferies reports that every $10 increase in crude prices could raise inflation by approximately 0.2 to 0.25 percentage points if the cost is passed on to consumers. If the government opts to cut fuel taxes to mitigate the impact, it could also widen the fiscal deficit.
LPG Could Be the Bigger Vulnerability
Experts suggest that the greater risk may lie not in crude oil but in cooking gas. India has become the world’s second-largest LPG importer after China, with most shipments passing through the Strait of Hormuz. Unlike crude oil, India does not maintain large strategic reserves of LPG; existing stocks cover only about two to three weeks of demand, while crude oil stocks can sustain consumption for roughly 30 to 35 days.
LNG Supplies Also at Risk
Natural gas imports could also face disruptions. In the previous year, India imported about 25 million tonnes of LNG, with approximately 14 million tonnes transported through Hormuz. This positions India among the world’s largest LNG buyers, alongside China, Japan, and South Korea. LNG is essential for fertilizer production, power generation, and city gas networks supplying compressed natural gas (CNG) for vehicles and piped cooking gas for households. Early signs of strain have already emerged, with Qatar’s Petronet LNG reportedly halting deliveries to GAIL due to restrictions affecting vessel movement.
LPG Price Hike Already Announced
Amid these pressures, domestic LPG prices have already seen an increase. As of March 7, the price of a 14.2-kg cooking gas cylinder has risen by ₹60 nationwide. The revised prices are as follows:
- Delhi: ₹853 → ₹913
- Mumbai: ₹852.5 → ₹912.5
- Kolkata: ₹879 → ₹930
- Chennai: ₹868.5 → ₹928.5
Fertiliser Supply Risks
India’s agriculture sector is heavily reliant on imports from West Asia. In 2025, India imported $3.7 billion worth of fertilizers from the region, including $2.2 billion in NPK fertilizers and $1.5 billion in nitrogen fertilizers. Any disruption during the crop cycle could tighten fertilizer supplies, increase subsidy burdens, and eventually raise food prices.
Impact on Diamond Trade
The conflict is also affecting India’s gems and jewelry industry, which relies significantly on the Middle East for trade routes and raw materials. In 2025, India imported $6.8 billion worth of diamonds from the Middle East, accounting for over 40% of total imports. The region contributes to around a quarter of India’s $30 billion annual jewelry exports, with the UAE supplying more than two-thirds of India’s rough diamond imports. Flight cancellations and airspace closures could disrupt supply chains and impact employment in this sector.
Risks to Manufacturing and Industry
Several manufacturing sectors depend on raw materials sourced from West Asia. In 2025, India imported about $1.2 billion worth of polyethylene polymers from the region, which are widely used in packaging, plastic products, and irrigation systems. Disruptions in this supply chain could ripple across various industries, affecting everything from consumer goods to agriculture.
Construction Sector Could Also Be Hit
India’s construction industry also relies on mineral imports from West Asia. In 2025, India imported $483 million worth of limestone from the region, a key ingredient in cement production. A prolonged shortage could escalate construction costs and delay infrastructure projects.
Vulnerabilities in Metal Supply Chains
West Asia is a significant supplier of metals. India imported around $190 million worth of direct reduced iron (DRI) and $869 million worth of copper wire from the region in 2025. Copper wire is crucial for power transmission, electrical equipment, and renewable energy infrastructure, meaning that disruptions could hinder India’s energy transition.
Financial Shock May Come First
Experts indicate that the initial impact may be financial rather than physical. Rising crude prices, increased shipping rates, and higher war-risk insurance premiums could inflate India’s import bill significantly, even if physical supplies remain stable.
Diaspora and Remittances
India’s overseas population is estimated at about 18.5 million, with roughly 10 million residing in Gulf countries, including Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain. These workers contribute significantly to India’s remittance inflows, particularly in sectors such as construction, services, and energy. In 2024-25, India received a record $135 billion in remittances, solidifying its status as the world’s largest recipient. States like Kerala, which receives about one-fifth of India’s remittance inflows, are particularly vulnerable to disruptions. A prolonged conflict could lead to evacuations and interrupt income flows that support millions of families.
Strategic Risks to Chabahar Port
India’s strategic investment in Iran’s Chabahar Port is also at risk. Developed as a gateway to Central Asia that bypasses Pakistan, the port is a key component of India’s regional connectivity strategy. However, U.S. sanctions and the ongoing conflict have cast uncertainty over the project. Although a temporary waiver allows operations until April 2026, the future of the port remains uncertain if tensions escalate further.
A Broad Supply Shock
India’s dependence on the Middle East extends far beyond oil and remittances. With nearly $100 billion worth of imports from the region, experts warn that a prolonged disruption could affect sectors ranging from agriculture and plastics to diamond cutting and infrastructure.
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Published on 2026-03-07 08:36:00 • By Editorial Desk
