India’s petroleum Industry is a comprehensive sector encompassing exploration, production, refining, distribution and marketing of petroleum and its byproducts. This includes upstream activities, Midstream activities and Downstream activities. The oil and gas sector is one of India’s eight core industries and plays a pivotal role in shaping decisions across other major economic sectors. Due to the economy of the country being dependent on energy needs, the need for petroleum and natural gas is projected to grow steadily in the coming years, making this sector very lucrative to invest in. As of March 2025, India remained the third-largest consumer of oil globally. Oil & Gas has a greater impact on society as a whole than only on the economy. As a result, the consensus among economists is that there is a significant correlation between changes in the oil price and a country’s rate of economic growth.
At present, India has 19 Public Sector Undertaking (PSU) refineries, 3 Private Sector refineries, and 1 Joint Venture refinery. The country’s refining capacity increased from 215.06 million metric tons per annum (MMTPA) in April 2014 to 256.81 MMTPA in April 2024. India is the seventh-largest exporter of petroleum products, and this fact is proved by its largest refinery at Jamnagar, which is among the biggest refineries in the world. This reflects the power of India in the petroleum refining industry. India’s Global ranking in ethanol blending in petrol is 2nd, Biofuel producer is 3rd, LNG Terminal Capacity is 4th, and Refining capacity (MMTPA) is 4th.
How is the War in the Middle East Affecting Energy, Trade, and Finance?
The World Faces yet another shock. The war in the Middle East is upending lives and livelihoods in the region and beyond. It is also dimming the outlook for many economies that had only just shown signs of a sustained recovery from previous crises. The shock is global, yet asymmetric. Energy importers are more exposed than exporters, poor countries more than richer ones, and those with meagre buffers more than those with ample reserves.
Beyond its painful human toll, the war has caused serious disruption to the economies of the most directly affected countries, including damage to their infrastructure and industries that could become long-lasting. Although these countries are resilient, their short-term growth prospects will have been negatively affected. Meanwhile, large energy importers in Asia and Europe, bearing the brunt of higher fuel and input cost about 25 to 40 per cent of the global oil and 20 to 30 per cent of the Liquefied natural gas pass through the Strait of Hormuz, feeding demand not only in Asia but also in parts of Europe. Economies heavily dependent on oil imports in Africa and Asia are finding it increasingly hard to access the supplies they need, even at inflated prices.
Parts of the Middle East, Africa, Asia-Pacific, and Latin America face the added strain of higher food and fertilizer prices and tighter financial conditions. Low-income countries are especially at risk of food insecurity; some may need more external support, even as such assistance has been declining.
Although the war could shape the global economy in different ways, all roads lead to higher prices and slower growth. A short conflict might send oil and gas prices soaring before markets adjust, while a long one could keep energy expensive and strain countries that rely on imports. Or the world may settle somewhere in between- tension linger, energy stays costly, and inflation proves hard to tame-with ongoing uncertainty and geopolitical risk. Much depends on how long the conflict lasts, how far it spreads and how much damage it inflicts on infrastructure and supply chain.
Middle East crisis: Rising crude oil prices create pressure across Indian Industries
For India, which imports a major portion of its crude oil requirements, the impact is visible across several industries, including paints, chemicals, textiles, metals, logistics, aviation, and consumer goods. Rising crude prices are increasing transportation expenses, raw material costs, freight charges, marine insurance premiums, and supply chain disruptions.
As a result, multiple sectors are now facing margin pressure, delayed exports, inventory cost increases, and working capital stress.
Chemical companies face feedstock and export challenges
The Indian chemical industry is highly dependent on crude-linked feedstocks globally, such as naphtha, methanol, benzene, ammonia, and other petrochemical derivatives. Rising tensions in the Middle East have increased feedstock prices globally while also disrupting shipping routes and export logistics. Feedstock inflation of 15-30% increases and margin pressure in the industries is 3-7%, and export delay of 2-6 weeks due to the delay in the shipments needing longer working capital and higher freight and container costs.
Textile Industry impacted by freight costs and synthetic fibre inflation
The textile sector is witnessing indirect pressure through the logistics disruptions, higher synthetic fibre costs, and the gas prices. Synthetic yarns such as polyester are heavily linked to crude oil prices. In addition, exporters are facing rising shipping expenses and container shortages. Freight costs may increase by 40%, the export margin may decline by 6%, and gas shortages may also cause price increases.
The metal sector faces energy cost pressure
The metal industry is also vulnerable because steel and aluminium production are highly energy-intensive processes. Higher crude and LNG prices result in cost increases of up to 25%, and EBITDA Margin shrinks 2-3%.
Petrochemicals and refining Businesses Under pressure
The petrochemical Industry is directly exposed to crude oil volatility because feedstock prices rise immediately during supply disruptions. Brent oil was more than $100 per barrel, and LNG Asia price was more than $20 per MMBTU in March month. A sharp rise in prices creates instability in the Market.
Inflation and Inflation Expectations
If elevated energy and food prices persist, they will fuel inflation worldwide. Historically, sustained oil price spikes have tended to push inflation higher and growth lower. Over time, higher transport and input costs work their way into the prices of manufacturing goods and services. For many countries that had only just brought inflation closer to target, and even more so those with stickier inflation, risk a renewed period of uncomfortable price pressures.
Finally, the war has unsettled financial markets. Global stock prices have declined, bond yields have risen across major advanced economies and many emerging markets, and volatility has increased. The market sell-off has so far been contained compared to the past global shocks. Nonetheless, these moves have tightened financial conditions worldwide. Crude oil prices remained elevated at nearly $100 per barrel, significantly above the historical average, while the government increased gold import duty to 15%, imposed restrictions on sugar exports, and raised domestic oil and gas prices.
Continued FII outflows from Indian equities, Sharpe currency depreciation towards a record low level near 97 RS. against a dollar and a step rise in the 10-year government bond yield to around 4.7%, reflecting growing concerns over stagflation risk in the global economy.
Conclusion
The crisis in the Middle East has once again highlighted how crucial energy security is for all economies. Increasing crude oil prices are putting pressure on various sectors, including industry, transportation, inflation, and household costs throughout India. Areas such as chemicals, textiles, metals, logistics, and petrochemicals are already experiencing heightened expenses and disruptions in their supply chains. Prime Minister Narendra Modi has also recently stressed the need to utilize public transport and decrease fuel dependency to manage energy use. The current circumstances clearly illustrate that nations prioritizing alternative energy sources, robust infrastructure, and effective supply chains will be more equipped to handle future global challenges.