Crisil Ratings has sharply lowered its estimate of the damage from the region’s recent conflict, saying the impact on India Inc’s operating profitability is now likely to be limited to around 100 basis points this fiscal, compared with the 200-basis-point hit it had projected under an earlier stress scenario that assumed prolonged disruption and a closure of the Strait of Hormuz.
The ratings agency’s revised assessment follows the reopening of the critical shipping route after a US-Iran memorandum of understanding and the subsequent cooling in crude oil prices. While oil markets have responded quickly, Crisil cautioned that supplies of key inputs such as gas and urea may take longer to normalise as supply chains recover from the disruptions caused during the conflict.
Oil relief, but caution remains
“The recent sharp correction in crude oil prices and likely normalisation of gas supplies are beneficial for India Inc as that would ease cost pressures meaningfully,” said Subodh Rai, Managing Director, Crisil Ratings.
Assuming Brent crude averages $80-85 per barrel this fiscal and gas supply disruptions ease over the next four months, Crisil expects 24 of the 34 sectors it analysed to see only limited impact on revenue and margins. Demand, it noted, continues to be supported by government infrastructure spending, steady consumption trends and calibrated price increases by companies.
Airlines, chemicals among sectors under pressure
Not all sectors will emerge unscathed. Crisil expects 10 sectors to face a meaningful squeeze on profitability, including airlines, ceramics, flexible packaging, speciality chemicals, polyester textiles and diamond polishing.
Airlines are likely to remain vulnerable to currency pressures and limited pricing power, while ceramics could face margin pressure from elevated fuel costs and constrained gas availability. Commodity-linked sectors may also struggle to fully pass on higher input costs.
| Parameter (FY27) | Current Scenario | May 2026 Stress Scenario |
|---|---|---|
| Duration of disruption | 4 months for gas, 3 months for oil | 3 quarters for both oil and gas |
| Brent crude assumption | $80-85/bbl | $110/bbl |
| Average ₹/$ rate | ₹93-95 | ₹96-97 |
| Sectors facing material margin pressure | 10 | 22 |
| Sectors with negative credit outlook | None | Ceramics |
| Sectors with moderately negative outlook | Polyester textiles, diamond polishing, flexible packaging, speciality chemicals, airlines, ceramics | Basmati rice, auto components, polyester textiles, diamond polishing, flexible packaging, speciality chemicals, airlines |
Despite the improved outlook, Crisil warned that risks have not disappeared. The US-Iran understanding remains non-binding, keeping the possibility of renewed tensions alive. The agency also flagged El Niño-related weather risks, which could weigh on rural demand and complicate the broader economic outlook later in the year.
Still, compared with the worst-case scenario outlined just a month ago, corporate India appears to be facing a far less severe earnings shock from the turmoil in West Asia.
Despite the improved outlook, Crisil cautioned that the risks have not disappeared. “The correction in crude oil prices and the gradual easing of both shipping-related costs and gas supplies provide timely relief to India Inc,” said Somasekhar Vemuri, Senior Director, Crisil Ratings. However, he noted that the geopolitical situation in West Asia remains fluid and escalation risks persist.
Vemuri added that softer crude prices would support the government’s capital expenditure programme and provide room to respond to any demand-side weakness. “This becomes particularly relevant as El Niño poses risks to the monsoon and, in turn, domestic rural demand,” he said.
