India appear better stocked for West Asia crisis, but oil shock threatens

As tensions rise in West Asia, the Indian government appears more prepared regarding energy and fertilizer supplies, The Times of India (TOI) has reported.

However, increasing oil prices may negatively affect the currency, the fiscal deficit, and foreign investments, which are already under pressure.

Freight rates have nearly skyrocketed to ten times their pre-war levels on some routes, and these could increase further due to rising insurance costs. The difficulty in finding ships and crew to navigate through the Strait of Hormuz could impact exports and global supply chains, contributing to container shortages and port congestion. On October 22, the Drewry World Container Index reported a rate of $4,585 for a 40-foot container, compared to $1,746 on October 25, 2025.


Ajai Sahay, director general at FIEO, told TOI that it is already pushing freight rates beyond a point. "Right now, buyers are managing because they were short of inventory. Now, that they are stocked up, it is unclear if they can absorb higher freight. Fresh disruption in West Asia will have an adverse impact for rest of the world too,” he said. Sahay added that container rates to West Asian ports have surged from $800 to between $8,000 and $10,000.

The East-West container freight market is facing uncertainty as security risks continue to disrupt maritime movements. Drewry reported that only two container ships entered the Gulf in Week 42, a decrease from five the previous week, as per TOI. While travel through the Suez Canal has shown a slight increase, the situation remains unstable in the region.

Concerns also exist regarding the entry of crews and vessels into the Strait of Hormuz, a critical area in the ongoing conflict, with most businesses preferring to avoid uncertainty that could affect global energy supplies.

Currently, Indian refiners are facing high crude prices, averaging $120 a barrel in October—the highest level in twelve years. The rising costs of petrol and diesel are putting pressure on state-run retailers, forcing them to sell fuel at a loss as prices at the pump are tied to international rates.

While the government has attempted to manage these challenges through duty cuts and allowing price increases, there is limited scope for further fiscal relief. Fuel and fertilizer subsidies have already surged beyond last year's levels, indicating that additional support may be necessary.

Top officials have said that fertilizer companies took advantage of lower prices recently and stocked up for the next season, while the fertilizer ministry has some surplus cash due to savings.

Currently, the government benefits from higher-than-expected disinvestment earnings and dividends from state-run organizations, keeping tax revenues stable and likely maintaining the fiscal deficit at 4.3% of GDP. However, a surge in import costs from rising commodity prices could affect the trade and current account deficits. A weaker rupee may deter foreign investments in Indian stocks.

(With inputs from TOI)