PM Flags “Unprecedented” Economic Pressure from Iran Conflict; Govt Forms GoM to Tackle Impact

The West Asia conflict has created “unprecedented economic, national security, and humanitarian pressures” for India, Prime Minister Narendra Modi said, as the government moved to set up a group of ministers and senior secretaries to coordinate its response.

Addressing the Lok Sabha today, Modi underscored the scale of disruption stemming from the conflict’s persistence, pointing to its impact on global energy markets, trade routes and supply chains, according to a government statement. Given India’s dependence on the region for crude oil, gas and fertilisers, and its exposure to critical shipping lanes such as the Strait of Hormuz, the risks are both immediate and structural, he said.

The policy response was formalised a day earlier at a meeting of the Cabinet Committee on Security chaired by the Prime Minister, where he directed the creation of a dedicated group of ministers and secretaries to ensure a whole-of-government approach, according to a separate release by the government.

The government’s assessment spans sectors including agriculture, fertilisers, petroleum, power, MSMEs, exporters, shipping, trade and finance, with both short-term mitigation and longer-term adjustments under consideration.

The immediate concern remains energy security. A large share of India’s oil, gas and fertiliser imports transits through the Strait of Hormuz, where shipping has become increasingly uncertain.

To mitigate this, the government is diversifying sourcing and engaging with global partners to secure maritime routes. Modi said India has expanded its energy import base from 27 to 41 countries over the past decade, reducing reliance on any single region.

Strategic buffers are also being deployed. India holds over 53 lakh metric tonnes in its Strategic Petroleum Reserve, with plans to increase this beyond 65 lakh metric tonnes, in addition to inventories held by oil companies.

The government is also monitoring shipping disruptions closely, with several cargoes delayed in the Strait of Hormuz having reached India following coordinated efforts, Modi said.

Policy measures are aimed at containing the transmission of global shocks to domestic consumers.

The West Asia conflict has entered its fourth week, centred on escalating hostilities between Iran and the US–Israel alliance, with direct strikes on energy infrastructure and rising risks to shipping through the Strait of Hormuz, a critical artery for global oil and gas flows. The confrontation has seen retaliatory attacks across the region and threats to disrupt maritime traffic, pushing crude prices above $110 per barrel and sharply increasing freight and insurance costs.  For India, which sources a significant share of its crude, LNG and fertiliser imports from this corridor, the disruption poses a dual challenge of securing supplies while containing inflation and managing external balances.

The Indian government has prioritised LPG availability, ensured continuity in petrol and diesel supplies, and maintained adequate coal stocks at power plants to prevent electricity shortages, according to the PIB statement.

Modi also called for coordination with state governments to prevent hoarding and black-marketing of essential commodities.

The conflict’s implications for fertiliser availability and the upcoming kharif season were reviewed in detail.

The government said existing inventories and expanded domestic capacity will ensure timely availability. Alternative sourcing strategies are also being pursued.

Modi noted that six new urea plants commissioned over the past decade have added more than 7.6 million tonnes of annual capacity, alongside a significant increase in domestic production of DAP and NPK fertilisers.

Foodgrain stocks remain adequate, with contingency arrangements in place to safeguard food security.

Sectoral vulnerabilities in chemicals, pharmaceuticals and petrochemicals are being addressed through plans to diversify imports and expand export markets.

An inter-ministerial group is already meeting daily to track disruptions in import-export chains and resolve bottlenecks, Modi said.

Further measures across sectors are being prepared for implementation following consultations with stakeholders.

The government’s approach combines supply diversification, buffer deployment and administrative measures to limit immediate disruption, while maintaining macroeconomic stability.

At the same time, Modi cautioned that the conflict’s economic impact could persist, given the centrality of West Asia to global energy markets.

“I am fully confident that through the joint efforts of the government and industry, we will be able to face these circumstances effectively,” he said.