US-Iran War Reignites: What It Means for India's Economy And Markets

The renewed military confrontation between the United States and Iran has once again raised concerns over India's energy security, financial markets and strategic interests in West Asia, following the collapse of a ceasefire that had lasted barely two weeks.

The US carried out another round of strikes on Iran on Thursday after launching its first attacks earlier on Wednesday. US President Donald Trump said the temporary ceasefire was no longer in effect and warned Tehran that any further attacks on commercial shipping would invite consequences that would "get much worse".

Washington said the latest strikes were launched in response to attacks on commercial tankers passing through the Strait of Hormuz, a key global shipping route.

The renewed hostilities have also brought Iran's Chabahar port — where India operates the Shahid Beheshti terminal and has made significant investments — into focus as the conflict expands.

Indian Markets Feel The Heat

The escalating tensions triggered a sharp reaction in Indian financial markets on Wednesday as investors weighed the potential economic fallout.

The BSE Sensex ended the session at 76,503.60, down 1,677.12 points or 2.15%, while the Nifty50 closed at 23,882.05, falling 516.65 points or 2.12%. During intraday trade, the Sensex had plunged as much as 1,921 points to 76,259.03, while the Nifty touched a low of 23,805.20.

Markets showed signs of recovery on Thursday. By around 12 pm, the Sensex had climbed 532 points, or 0.7%, to 77,035.37, while the Nifty50 was up 169.05 points, or 0.71%, at 24,051.10.

Oil prices also surged amid fears of supply disruptions. Brent crude settled 5.2% higher at $78.02 a barrel on Wednesday, while US West Texas Intermediate (WTI) crude gained 4.4% to close at $73.52. In early trade on Thursday, Brent rose another 1.1% to $78.88 a barrel, while WTI advanced 1.2% to $74.37.

Is India's Oil Supply At Risk?

Despite the fresh escalation, India's crude oil supply remains relatively well protected because of its diversified sourcing strategy, according to Sumit Ritolia, Manager at Modelling and Refining at Kpler, in a LinkedIn post on Wednesday.

"India's crude import basket today is far more resilient than it was a few years ago," Ritolia said.

He noted that although oil flows through the Strait of Hormuz had not fully returned to pre-conflict levels before the latest attacks, Indian refiners have managed supplies effectively over the past 100 days by sourcing crude from multiple regions.

According to Ritolia, Russian crude continues to account for a significant share of India's imports, while Saudi Arabia and the United Arab Emirates (UAE) have supplied cargoes through alternative infrastructure that bypasses the Strait of Hormuz. Additional supplies from West Africa and Latin America have further strengthened India's import mix.

"Cargoes that can safely transit the Strait of Hormuz are still expected to move, although freight rates and insurance costs could rise if tensions persist," Ritolia added.

LNG and LPG Remain The Bigger Concern

Ritolia cautioned that liquefied natural gas (LNG) and liquefied petroleum gas (LPG) remain more vulnerable than crude oil because there are limited short-term alternatives if supplies from the Gulf are disrupted.

"A prolonged period of instability could tighten availability, increase freight costs, and add pressure to regional prices again as we have seen over last few months," he said.

Even so, he believes India is better positioned than in previous crises. "For now, India's crude supply story remains one of diversification and resilience, not immediate scarcity," he added.