Israel-Hamas war impact on India

Israel-Hamas war impact on India 

first let's understand macroeconomics.

While macroeconomics is focused on the actions that governments and countries take to influence broader economies.

Now let's understand about impact. 

The ongoing Israel-Hamas war is likely to affect market sentiments and India's trade relations with the region, experts say. Indian retail investors may face negative consequences if the conflict continues. Disruption of Israeli ports could bring trade to a standstill. India’s trade with Israel – in agricultural products, chemicals, electronics, machinery, and vehicles – doubled to $10.7 billion in FY23. In the current scenario, Indian exporters may face higher insurance premiums and shipping costs. The crisis and the resulting effects on global crude oil supply may hit Indian household budgets. 

Global tech giants operating in Israel may consider relocating to India. 

IT companies such as Wipro and TCS, which have operations in Israel, are closely monitoring the situation and designing business continuity plans. 

Pharmaceutical companies are concerned about the impact on the region, which is a key export market for essential drugs. 

India also imports around 80 per cent of its crude oil requirement. Any sharp spike in crude oil prices will worsen the inflation outlook and put pressure on India’s import bill. The price of crude oil has soared 6.40 per cent to over $90 per barrel on October 16, against $84.58 on October 6.

“Upstream oil companies like ONGC and Oil India are the key beneficiaries of the buoyant crude oil prices. On the other hand, crude oil prices for oil marketing companies (OMCs) like HPCL, BPCL and IOC experience an inverse correlation to profitability and stock prices. Historically, any significant spurt in crude oil prices has led to a correction in stock prices of OMCs adding that high crude oil prices also stoke inflationary pressure on sectors like cement, paints, airlines and chemicals.

Commenting on the defense sector, market analysts said due to the ongoing Russia-Ukraine and Hamas-Israel conflicts, defense budgets will receive a shot in the arm across the globe.

“Domestic defense companies like HAL, BEL, Mazagon Dock, Cochin Shipyard, L&T, Bharat Forge are likely to be the key beneficiaries in the long term,” he said. The US-based defense major Lockheed Martin’s stock price has soared over 10 per cent since the beginning of the war between Israel and Hamas.

The travel and tourism sector may also get a hit. “In case the situation is not normalized any time soon, the travel and tourism industry may witness some impact in short to medium terms. International airline business is likely to be impacted due to travel-related restrictions and suspension of services,”

India’s trade with Israel, the primary exports include diamonds (valued at approximately $1.4 billion), refined petroleum (about $582 million) and rice ($54.0 million). India accounts for 4.6 per cent of the total trade with Israel. “Gems and jewelry industry may witness some disruption in terms of diamond exports to Israel.

The Indian IT industry has a limited presence in Israel, largely focused on innovation partnerships and R&D. Companies like TCS set up base in Israel in 2005 and currently have 1,100 employees based out of Jerusalem. Recently, TCS and Jaguar Land Rover (JLR) introduced an Open Innovation Program in the region. Amongst other prominent IT companies, HCLTech has two offices in Israel. Tech Mahindra also recently tied up with Israel-based defense electronics firm ELTA Systems. Wipro has 80 employees (all locals) working at its Israel unit. “Overall, the safety of employees is of paramount interest for all IT majors, while from a business perspective, the impact is likely to be negligible.

A significant portion of the world’s bromine and bromine compounds are sourced from the Dead Sea region which lies between Israel and West Bank. “If the fighting escalates further and spreads to the Eastern border of Israel (where the Dead Sea is located), bromine supplies could potentially be impacted, leading to higher prices. This could benefit Archean Chemical Industries, which is a major producer of bromine in India,”

On the other hand, many domestic pharmaceutical companies have tie-ups with Israeli companies for the development of drugs. Sun Pharma owns a majority stake in Israel’s Taro Pharma and the impact as of now seems to be negligible.

Quick note

IT

port in logistics

Chemical 

Pharm

Tyre Sector

Railway infra 

Gems and jewelry industry 

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