US-Israel-Iran war: The joint attack by the US and Israel on Iran has disrupted the logistics supply chain in the Strait of Hormuz. The US-Iran war, cutting traffic in the world’s most important shipping chokepoint, underscores the growing concern about maritime security as the conflict involving the US, Israel and Iran spreads through the region and heightens tensions around Hormuz, which handles a fifth of the world’s seaborne oil and a similar portion of liquefied natural gas.
According to stock market experts, disruption in the Strait of Hormuz due to the outbreak of the US-Iran war will not remain limited to oil and energy. They believe the US-Israel-Iran war, cutting traffic in the Strait of Hormuz, would affect fertiliser, chemical, logistics, tyre manufacturer, and road transport companies in India as well. Aviation and oil marketing companies will be the most affected among these segments, experts added.
Madhavi Arora, Chief Economist at Emkay, believes that rising tensions in the Middle East raise the risk of shipping disruptions and higher global freight and insurance costs, even without a full blockade.
“In the event of Middle East tensions continuing, higher oil prices will directly feed into the input costs and macro indicators. For every $1/bbl increase in Brent, we estimate an impact of ~ ₹0.52/litre on diesel and ~ ₹0.55/litre on petrol retail prices,” Madhavi Arora of Emkay said.
US-Iran war: How important is the Strait of Hormuz?
Highlighting the importance of the Strait of Hormuz and its impact on Indian companies, Seema Srivastava, Senior Research Analyst at SMC Global Securities, said that a disruption to the Strait of Hormuz poses significant risks to India’s energy security, trade routes, and economic growth.
“The Strait of Hormuz is a critical waterway for global oil trade, with around 20% of global oil passing through it. India imports nearly 90% of its crude oil, with about 50% of these imports coming through the Strait,” said Seema Srivastava of SMC Global Securities.
According to a report published by an Indian brokerage, Enrich Money, India is uniquely and acutely exposed to this disruption. Unlike economies with more diversified geography, India’s energy security is structurally tied to the Persian Gulf. A significant portion of its primary energy imports must pass through the Hormuz choke point, making any closure a direct threat to domestic industrial stability.
On the market segments in India that will be hit directly or indirectly due to traffic disruption in the Strait of Hormuz after the US-Iran war, the Enrich Money report says that development around the Strait of Hormuz is highly negative for the oil marketing companies, as they will have to face the inventory loss and margin compression. The world’s most important shipping chokepoint holds the key for companies dealing in petrochemicals and polymers, as they face severe margin pressure from rising naphtha costs imported from the US.
US-Iran war: Bad news for fertiliser companies
Indian fertiliser companies’ ammonia and urea imports will be severely hit, and due to government intervention in this segment, they may find it tough to pare losses by increasing prices. So, the Indian fertiliser companies may have to face demand-supply constraints and high raw material costs, squeezing their margins, the Enrich Money report said.
The Enrich Money report added that disruption in the Strait of Hormuz will have a negative impact on refiners, paints, and adhesives, aviation, auto, FMCG, and metal companies.
US-Iran war: These 10 stocks are expected to be most affected
Speaking on the impacted sectors and stocks that can be most affected due to disruption in the Strait of Hormuz, Seema Srivastava of SMC Global Securities, listed out the following 10 stocks:
– Aviation: IndiGo, Air India
– Oil Marketing Companies: IOCL, BPCL, and HPCL
– Fertilisers: Chambal Fertilisers, IFFCO, and Paradip Phosphates
– Paints and Chemicals: Asian Paints, Pidilite, and Deepak Nitrite
– Logistics: Alcargo Logistics, Bluedart Express, TCI Express, and Adani Ports & SEZ.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
