Iran crisis & India – What German companies need to know now
Geopolitics is only “far away” until it has an impact on costs, supply capability and payment channels. The escalation around Iran and the Strait of Hormuz is just such a case. India is not a party to the war – but the economic side effects are already affecting many Indian set-ups. This article puts into context what has happened, what it means – and what German companies should do now.
1. what has happened – and why is it happening so quickly?
On February 28, 2026, US and Israeli forces launched attacks on Iranian missile and nuclear facilities as part of “Operation Epic Fury”. Ayatollah Khamenei was killed in the process. Within hours, around 150 tankers were jammed off the Strait of Hormuz. On March 2, the Iranian Revolutionary Guard Corps (IRGC) declared the formal closure of the strait. Maritime traffic through Hormuz collapsed by around 80 percent.
Since then, the conflict has escalated on a daily basis. On March 7, more tankers were attacked. On March 10, US forces destroyed 16 IRGC mineships in the strait. On March 11, a projectile hit a freighter 36 nautical miles off Abu Dhabi. Drone attacks on the UAE, Bahrain, Kuwait and Saudi Arabia – including on data centers in Dubai and Dubai International Airport – show that the conflict has spread to the entire Gulf region.
As of March 12, 2026: Brent Crude has passed the psychologically significant 100-dollar mark for India. The IEA coordinates the largest emergency release of strategic reserves in its history – 400 million barrels from 32 countries. The markets rise nonetheless.
2. why India is particularly exposed
India is not a party to the war. But hardly any other major economy is so deeply integrated into the supply chains of the Persian Gulf.
The figures speak for themselves:
India imports around 90 percent of its crude oil requirements. Around 45 to 50 percent of this comes from the Middle East – and around half of this volume passes through the Strait of Hormuz. For LNG, the Hormuz share is 56 percent, for LPG (liquefied petroleum gas/cooking gas) even 80 to 85 percent. The rule of thumb of the Indian central bank is: every 10 US dollar increase in the price of crude oil costs India 13 to 14 billion dollars more per year in import costs, widens the current account deficit by 0.4 to 0.5 percentage points and drives up inflation by 0.2 to 0.25 percentage points.
Brent is trading at over 100 dollars today. The Indian oil basket was already at around 116 dollars on March 9. The rupee fell to an all-time low of ₹92.4 per US dollar. The Nifty 50 lost over 5 percent in the first week of March.
Reuters explicitly described India as “most vulnerable” among the major economies in the event of prolonged disruptions in the Middle East.
3. the seven levels of impact – energy is just the tip of the iceberg
German companies are understandably focused on energy prices and logistics. Both are real, measurable risks. But the actual structural risks lie deeper – and have hardly been discussed to date.
Level 1: Energy & fuel costs
The direct fallout from the Hormuz crisis will initially affect energy costs. On March 5, India activated emergency powers under the Essential Commodities Act. LPG supplies to commercial customers are restricted. Since March 12, the first restaurants have been closing on a daily basis because LPG supplies are being rationed. In Uttar Pradesh, long queues formed at filling stations. LPG cylinders are already being traded on the black market for twice the normal price.
At the same time, the Indian government is still holding back its strategic reserves. The official buffer is 74 days (strategic reserves plus commercial stocks). When the IEA called for a coordinated release, India refused to participate – with the clear justification: “This crisis is not our creation.” This is not an act of defiance. This is strategic energy policy.
Level 2: Logistics & Shipping
Almost 95 percent of India’s freight has been diverted via the Cape route since the start of the conflict. This means an additional 3,500 nautical miles and 10 to 14 days more transportation time. The spot rates for containers from Mumbai to Rotterdam rose by 477 percent within a few days – from 650 to 3,750 US dollars. The war risk premiums for tankers sailing the Hormuz routes have increased fivefold to up to 1 percent of the ship’s value.
For German companies with business in India, this means that delivery times are lengthening, costs are rising and existing logistics contracts may no longer be able to be fulfilled under the agreed conditions.
Level 3: Remittances – the underestimated risk factor
India is the world’s largest recipient of foreign remittances: around 135 billion US dollars per year. Around 38 percent of this – i.e. around 51 billion dollars – comes from the Gulf region, primarily from the UAE. Around 10 million Indian citizens work there.
When drone strikes paralyze economic activity in Dubai, Kuwait or Bahrain, Indian guest workers lose income and jobs. This directly affects structurally weak states such as Kerala, Bihar and Uttar Pradesh – through declines in consumption volumes, defaults on loans and falling purchasing power in regions that are structurally dependent on remittances. The Indian government has already activated a special task force for the protection and possible evacuation of foreign workers.
Level 4: Agriculture & Fertilizers
A completely overlooked risk in the German India debate: India imports the majority of its fertilizers – urea, DAP, MOP, ammonia – from the Gulf region, and this supply chain runs through Hormuz. An interruption jeopardizes the so-called “Kharif sowing cycle”, which begins in June with the monsoon. Timing is critical here: fertilizer shortages in these weeks will show up as food inflation in six to nine months.
At the same time, direct trade routes with Iran are disappearing – Indian basmati exports, Iranian pulses and apples as a favorable import alternative. The diamond trade in Surat is also affected.
Level 5: Financial markets & macroeconomics
The reaction of the Indian financial markets was severe: on 2 March, the Sensex lost 4,750 points within one trading day and the market capitalization of the BSE shrank by the equivalent of around 21.9 trillion rupees. The India VIX – India’s volatility index – rose to 20.3. The IPO volume in the current quarter is 35% below the previous year’s level.
Analysts at the Reserve Bank of India (RBI) are facing a classic dilemma: fight inflation or protect growth? Reuters analyzes that, given the situation, the RBI will prioritize growth and bring forward interest rate cuts – at the expense of higher inflation.
Level 6: Industry & sectoral impacts
The Hormuz crisis is hitting a number of industries particularly hard:
- Refineries and petrochemicals come under pressure on margins due to more expensive crude oil and naphtha
- Aviation suffers from rising kerosene prices and rupee weakness, which increases leasing costs
- Automotive and OEMs see bottlenecks in raw materials and accelerate the localization of components
- IT and cloud affected as Iranian drone attacks on Dubai data centers – including Amazon infrastructure – threaten cloud redundancy for India operations
Level 7: Geopolitics & connectivity – the most strategically important level
In recent years, India has pursued a remarkable dual strategy: simultaneously promoting the INSTC corridor (via the Iranian port of Chabahar to Central Asia and Russia) and the IMEC corridor (via Saudi Arabia, the UAE and Israel to Europe). Two routes, two geopolitical directions, one principle: strategic autonomy.
Now both flanks come under pressure at the same time.
The Chabahar port, in which India has invested heavily for years and for which a 10-year operating agreement was signed in 2024, is under massive sanctions pressure due to the Iran conflict. The US sanctions waiver that has allowed India to operate the terminal to date expires in April 2026. Whether and under what conditions it will be extended is one of the unanswered strategic questions of the coming weeks.
The IMEC corridor, which was celebrated at the 2023 G20 summit in Delhi as the West’s response to China’s Belt and Road Initiative, would at the very least be politically damaged by the conflict between its partner states if renewed tensions were to arise between Israel and its Arab neighbors, for example.
India therefore has a serious connectivity problem in the short term – and a considerable strategic investment at stake.
4 India’s response: strategic autonomy under extreme conditions
India’s foreign policy is reacting to the crisis as it always does: with active balancing. Foreign Minister Jaishankar held direct talks with his Iranian counterpart on March 12 and is said to have negotiated free passage for Indian ships – even though Iran partially denied these reports. At the same time, Prime Minister Modi publicly expressed solidarity with Israel. And India continues to hold on to cheap crude oil purchases from Russia.
No other country today can make these three calls at the same time. This is not swing politics – this is the rational pragmatism of an economy that imports 90 percent of its energy needs and simply cannot afford to take sides.
It is true that this model is coming under pressure. It is not true that it has failed because of this.
5 What does this mean for German companies in India?
Immediate measures (0-4 weeks)
Hedge energy costs: oil and gas prices will remain at a high level. Check hedging instruments, incorporate commodity risk surcharges (up to 1% of ship value) in all ongoing calculations.
Check logistics contracts: Check existing freight contracts for force majeure clauses and current conditions. Container rates and delivery times have changed fundamentally – many contracts do not reflect the current reality.
Chabahar compliance check: Companies using or planning to use the Chabahar corridor as a logistics route should consult a sanctions lawyer immediately. The waiver status is unclear and the risk of sanctions is increased.
Check liquidity buffer: Rupee weakness and rising import costs put pressure on working capital. Adjust intra-group financing and cash flows to current exchange rate scenarios.
Medium-term measures (1-6 months)
Accelerate localization: Companies that have been sourcing components or semi-finished goods from the Middle East should consider Indian alternatives. The Production-Linked Incentive (PLI) Schemes offer cashbacks of 4 to 6 percent – the crisis is accelerating what makes strategic sense anyway.
Structure supply chain diversification: Contractually secure a two-route strategy (Cape and alternative sea routes). Build up air freight capacities as a backup for time-critical goods.
Address sector-specific risks: Check IT infrastructure for cloud redundancy (Dubai data centers affected). Test pharmaceutical supply chains for API raw material supply. Evaluate automotive setups for degree of localization and PLI capability.
Long-term opportunities (from 6 months)
This is the real strategic point that many companies are currently overlooking: The Iran crisis is not changing the India story – it is accelerating it.
According to a KPMG survey, 79% of German companies in India are planning additional investments by 2030 in response to global geopolitical tensions. The logic behind this is simple: India is the alternative. Not to Iran, not to Russia – but to China.
If you want to take supply chains out of China, look to India. If you are looking for defense industry partnerships, look to India (submarine project P75I with TKMS as an example). If you want to invest in green energy infrastructure, India has one of the most ambitious renewable energy programs in the world.
The current crisis is increasing costs and complexity in the short term. It does not change the fundamentals.
6 India: Not immune – but more resilient than others
A direct comparison shows why India is more stable than other emerging markets despite all the exposure:
India has a domestic market of 1.4 billion people – that is an economic buffer that Vietnam or Thailand do not have. The strategic oil reserves together with commercial reserves cover 74 days. The economy is diversified: IT exports, pharmaceuticals, automotive, agriculture, financial services. The political stability is – despite all justified objections to India’s quality of democracy – resilient by regional standards.
And: India has an active diplomacy that is actually on the phone with Iran today and is in talks with Israel and the USA at the same time. This is geopolitical capital that no other comparable market has.
7 The crisis as a catalyst – not a turning point
One thing is important to note: The Iran crisis does not demand a strategic change of course from most German companies with a commitment to India. It demands a faster pace in what many already had on their agenda.
Localization? Was already in the planning stage – now it is becoming more urgent. Supplier diversification? Was in the strategy paper for H2 2026 – now it is a Q2 priority. PLI funding application? Was on the table – now it pays off faster. Cloud redundancy? Was on the IT backlog – now it’s a board topic.
This is not a catastrophe. It’s an accelerator.
Crises compress decision-making cycles. Measures for which there was no mandate in calm times are now being given one. Investments that were difficult to justify internally are justifying themselves. Those who understand this and use the next few weeks to sharpen their own India positioning – instead of hesitating or even withdrawing – will be better positioned in 12 to 18 months than competitors who wait and see.
In concrete terms, this means
- Local production and procurement are gaining importance as risk buffers – and are becoming more financially attractive than ever thanks to PLI programs with 4-6 percent cashback
- Defense, green energy and infrastructure offer German technology providers access opportunities that are actively promoted by the new geopolitical architecture
- India as an export base – not just as a sales market – is becoming more calculable due to rupee weakness and lower labor costs in a number of sectors
- Those who set up governance and compliance properly now will create the basis for the next decade of growth – with structures that will also withstand the next crisis
The Iran crisis is not an argument against India. It is an argument for doing India right.
8 Conclusion: Four key messages for companies
Firstly: India is exposed – but resilient. The dependency via Hormuz is real. The resilience factors – domestic market, strategic reserves, political stability, active diplomacy – are too.
Secondly, the visible risks are just the tip of the iceberg. Energy and logistics are measurable and discussed. Remittances, fertilizer supply, cloud infrastructure and geopolitical connectivity are the structurally significant risks that hardly anyone talks about.
Thirdly, well-prepared companies win – even in crises. Those who check contracts now, localize supply chains, hedge and ensure compliance are better positioned than the competition. Crises accelerate differentiation.
Fourth, India’s strategic autonomy is not a mistake – it is the product. In a world divided into blocs, India deliberately remains attractive to all sides. Not as the Switzerland of Asia – but as an economy of 1.4 billion people with functioning democratic institutions, a stable legal system and the declared intention not to be drawn into geopolitical trenches. This is not a disadvantage in uncertain times. It is a locational advantage – especially for European companies looking for a reliable, growing market that is not geopolitically scorched.
In a world full of blocs, India is the rare country that wants to remain attractive to everyone. Those who understand this and set up the right structures now will position themselves not despite the global situation – but because of it.
Note: What this means for your company in concrete terms – talk to us
This article can give you a picture of the situation. What it cannot do: Tell you what the current crisis means for your specific India setup. For your supply chain. Your contracts. Your margins. Your next decision.
This is exactly the conversation we can have with you. Not a pitch. No standard portfolio. No fair-weather talk about India’s potential – others can do that.
But rather an open, bilateral discussion between you and us: What does this conflict mean for you in concrete terms? What are your real risks? And where do your concrete opportunities lie – viewed honestly?
We have been working operationally in India for over 20 years. We have accompanied crises, experienced escalations, seen bad advice and provided good advice. We talk openly about risks – even the uncomfortable ones. And we talk openly about opportunities – including those that require courage.
Our customers come to us because they need someone to tell them the truth – not the truth they want to hear, but the truth that helps them make the right decisions.
If you want to find out what all this means for you, make an appointment. We will take the time.
This article is based on our WBinar “Iran Crisis – Impact on India” from March 12, 2026. All data and estimates are correct at the time of publication.
