Iran Isreal war : How does it become threat to Indian economy

Oil is an important factor that affects the retail expenses made by households. The tensions in the Middle East has made the crude oil prices to rise. In a news article I found that, the crude price as on April 16th was at $91 per barrel. 

Now the question is, how does this affect our economy? The answer is very simple, India imports around 85% of crude. So any tensions affecting those countries, from which India imports crude, will pose a challenge to Indian economy and all other companies which are based on oil like petroleum companies, paint companies, etc. 

Position of oil based companies:

So, in my personal opinion, as of now investing in paint stocks is not a good idea. If the crude prices increase, investors usually think that the profits of petroleum marketing companies[like IOC, BPCL, etc] would also rise. This might trigger share prices of those companies for a short term.

The Indian economy:

When it comes to the economy, fuel is highly important for transportation of consumer goods from place of production to markets. So, increased cost of transportation can lead to increase in prices of consumer products. Even during Russia- Ukraine war, prices of products like gingelly oil rose. So, this can create mild rise in inflation. 

Impact of Houthi attack:

The case of exporting companies in India is different. The Houthi attack in Middle East has increased the expenditure for those firms. As these companies will have to take long route away from the red sea so as to escape from their attack. This can slightly reduce their profit margins. But, logistics companies might see a mild increase in their profit margins. 

Gold prices:

Another thing to be looked at is the gold prices. During war times, usually the gold prices tend to rise. The same story continues even now. The reason is, investors consider gold as safe haven asset during uncertain times. Generally, when the Dollar is getting stronger the gold price should decline. But now, due to war and the global tensions, even the gold prices are also increasing even when the Dollar is strong. 

Stock markets:

In the past five days, the VIX has increased by 11.49%. This clearly shows that there is an increase in volatility in markets. This must be due to the war. So it is very important to be cautious. During normal days, we can atleast guess the trajectory of the markets. But during volatile phase it is difficult. So during these times more importance should be given to fundamentals and buy on dip strategy should be used.