Iran War: The impact of increasing tension between America and Iran is no longer limited to the Middle East. Its impact is becoming visible on economies around the world. The biggest concern is regarding the prices of crude oil. In recent times, there has been a sharp rise in oil prices, due to which the problems of big oil importing countries like India have increased. Experts believe that if the tension continues for a long time, inflation may increase and this may have a direct impact on the earnings of companies.

Why is inflation becoming a big threat?

India buys most of its crude oil needs from abroad. In such a situation, when oil becomes expensive in the international market, the cost of transportation, logistics and production increases. Gradually its effect starts becoming visible on the prices of everyday goods also. In the last few months, inflation was under control, which brought relief to the companies. But now the rise in oil prices has again created the danger of inflation increasing. If fuel becomes expensive then the expenses of the companies will increase and ultimately the burden may reach the customers.

Petrol and diesel became cheaper by 22 rupees, people heaved a sigh of relief when the government reduced the prices.

How will corporate income be affected?

The earnings of any company do not depend only on sales, but its costs are also equally important. When raw material, fuel and transportation expenses increase, the profits of companies start decreasing. Although some big companies can reduce this effect by increasing the prices of their products, it is not easy for every company to do so. Especially in those sectors where competition is high, increasing the price can affect sales. In such a situation, there is a possibility of increasing pressure on the margins of companies.

Most pressure on these sectors

The biggest impact of rising oil prices can be on airline companies. Aviation fuel forms a major part of their cost. In such a situation, if fuel becomes expensive, either tickets will become expensive or the profits of the companies will decrease. Paint, chemical and petrochemical sectors may also come under pressure because their raw materials are directly linked to crude oil. Many experts have warned that the margins of these companies may be affected. Apart from this, FMCG companies, cement manufacturers, infrastructure companies and fertilizer industries may also face rising costs. Due to cost of freight transportation, their expenses will increase and profits may be affected.

Impact may be visible on stock market also

Rising inflation and high oil prices are not considered good news for the stock market either. Investors fear that if inflation continues to rise, the chances of cutting interest rates may reduce. This may increase market fluctuations. Experts say that at present the market is keeping an eye on the entire situation. The results of the coming quarters will decide how much impact rising costs have had on the earnings of companies.

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Could FY27 earnings estimates be slashed?

So far, expectations regarding companies’ earnings for FY27 remain positive. But if oil prices remain high for a long time, earnings estimates for many sectors may be cut. Analysts believe that the picture of this pressure can be clearly visible in the results of the first and second quarters. Especially those companies whose cost depends largely on fuel and imported raw materials will be more affected.

What’s the biggest concern next?

The biggest concern at the moment is how long the tension in the Middle East continues. If the situation becomes normal soon, there may be relief in oil prices. But if the conflict escalates, pressure on inflation, corporate earnings and the stock market may increase. This is the reason why from investors to companies, everyone’s eyes are now fixed on crude oil prices and global developments. The coming few months will decide whether rising input costs are just a temporary problem or whether it is going to become a major challenge for Bharat Inc.