Outlook Business Desk
The ongoing conflict between Iran, Israel and the United States is affecting several sectors in India, from energy markets to travel and trade. Rising crude oil prices and a weakening rupee are adding pressure. Among the hardest hit is the aviation sector, where West Asia airspace closures have forced cancellations and rerouting for airlines.
The conflict sharply escalated after United States and Israeli strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei on February 28. Iran soon retaliated with missiles and drone attacks targeting Israel and United States military bases across Gulf nations, raising fears of a wider regional conflict.
Airspace across Iran, Iraq, the United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Kuwait was closed after the conflict escalated. The shutdown disrupted India’s crucial West Asia corridor, which handles nearly half of the country’s international passenger traffic and serves as a major route for Europe-bound flights.
Meanwhile, more than 1,100 flights were cancelled between February 28 and March 2. Delhi’s Indira Gandhi International Airport alone saw around 350–410 daily cancellations, while disruptions spread to Mumbai and other major airports across India.
With northern routes closed due to Pakistan’s airspace restrictions and parts of Middle Eastern airspace considered unsafe, airlines now face a double challenge. Many flights from India to Europe and the United States require rerouting, adding nearly 2 to 4 hours to overall travel time.
Aviation Turbine Fuel (ATF), the biggest expense for Indian airlines, accounts for nearly 30–40% of total operating costs. ATF prices for March 2026 rose to about ₹96,638 per kilolitre, up 6% from February, as crude oil volatility linked to West Asia tensions increases cost pressures.
Credit rating agency ICRA projects the Indian aviation industry’s net loss to reach ₹170–180 billion in FY2026, up from ₹55 billion in FY2025. Losses are expected to narrow in FY2027, but these estimates may rise further due to the ongoing Middle East conflict,
Global crude oil prices also spiked earlier as West Asia tensions rose, with Brent crude briefly surpassing $114 per barrel. However, prices now dropped sharply, bringing WTI Crude Oil Futures dropped by nearly 5% to below $90 per barrel, while Brent Crude plunged to below $95 per barrel.
Additionally, the Indian rupee had weakened past ₹92 per US dollar for the first time on March 4, driven by war fears, rising oil prices and foreign outflows. Today, it rebounded slightly to ₹92.14 as global crude prices fell, easing some pressure on airlines.