Middle East Tensions: What crude oil fluctuations mean for Indian investors
As tensions in the Middle East persist, investors should monitor these sectors and adjust their investment strategies accordingly, here's why:
The escalating tensions in the Middle East have sparked concerns among Indian investors, as the region's instability impacts crude oil prices and India's trade relationships. The war can affect various sectors due to increased crude oil rates, trade tensions, and supply chain disruptions. It impacts the domestic market including defence, pharmaceuticals, diamond, port & shipping industries sectors.
As tensions in the Middle East persist, investors should monitor these sectors and adjust their investment strategies accordingly, here's why:
Impact on Defence sector
Domestic leading defence companies, such as Bharat Electronics Ltd (BEL), Bharat Forge, Hindustan Aeronautics Ltd (HAL), and Paras Defence have secured orders from Israel Aerospace Industries (IAI), bolstering India's defence industry capabilities.
Pharmaceutical sector
Indian pharma companies have significant exposure to Israel:
>> Sun Pharmaceutical Industries owns 72 per cent of Israeli company Taro Pharma, acquired in 2010 to enter the US dermatology market.
>> Dr Reddy's Laboratories and Lupin have business ties with Tel Aviv-based Teva Pharmaceutical.
How does it affect jewellery industry
India's jewellery industry relies heavily on Israeli diamonds, with 40 per cent of diamond trade occurring bilaterally. Leading companies like Titan, Kalyan Jewellers, and Rajesh Exports may face supply chain disruptions.
Impact on ports and shipping industry
Adani Ports' 70 per cent stake in Haifa Port - Israel's second-largest port - may face settlement issues, although Haifa Port contributes only 3 per cent to Adani's total cargo volume.
Impact on Agriculture and irrigation sector
Indian rice exporters, such as LT Foods and KRBL (India Gate Rice maker) may be impacted. Moreover, Jain Irrigation acquired Israeli irrigation equipment manufacturer NaanDan in 2012, strengthening India's irrigation technology.
Impact IT sector companies
Several IT companies, including TCS, Wipro, Tech Mahindra, and Infosys, provide services to Israeli companies.