JM Financial flags risks for port logistics sector amid West Asia tensions

Escalation in the US-Israel and Iran conflict and the possibility of disruption in the Red Sea and the Persian Gulf could impact Indian port logistics, according to JM Financial.

 

LNG shipments may bear the brunt in particular, while crude oil imports may realign if Indian refiners choose to source oil from alternative suppliers, the brokerage said. Any such realignment could impact cargo volumes at Indian ports in March 2026. Container volumes to the Middle East may continue to see some impact, though the fallout for ports such as Mundra and JNPT could remain limited.

 

According to the brokerage’s channel checks, shipping companies are seeking realignment of routes that avoid the Strait of Hormuz altogether, including via ports such as Khor Fakkan, Fujairah and Salalah. India is also looking to diversify LPG imports to the US and Oman.

Limited Mundra exposure

About 15 per cent of Mundra’s annual container volumes, or around 1.3-1.4 million TEUs, are linked to the Middle East, translating into a potential 3-4 per cent impact on Adani Ports and Special Economic Zone’s (ADSEZ) monthly volumes, according to JM Financial. Citing discussions with ADSEZ management, the brokerage said Mundra handles nearly 9 million TEUs annually, with around 15 per cent exposed to the Middle East. If the conflict extends beyond three months, the cumulative impact on volumes may be limited to about 1 per cent. 

 

Container volumes at other ports such as Vizhinjam, Katupalli, Colombo and Tanzania remain largely unaffected, while ports in Australia and on the east coast are also unlikely to see adverse impact. Haifa is not a major concern as it contributes around 1.5 per cent to ADSEZ’s FY26 earnings before interest, tax, depreciation, and amortisation (Ebitda).

Shippers seeking realignment of ports

Shippers are exploring alternative routes to avoid the Strait of Hormuz amid rising risks of disruption. JM Financial said Iran has not ruled out a blockade of the Strait of Hormuz and has attacked oil tankers off Oman and a Qatar LNG facility. Strikes were also reported at Ras Laffan in Saudi Arabia, affecting operations. 

 

Given the risks of sailing through the Strait of Hormuz, alternatives such as Khor Fakkan in the UAE and Salalah in Oman are being explored. Fujairah, which also bypasses the Strait, was operational but was hit by drone strikes that caused a fire at JSW Infra’s tankage. If alternative routes are worked out, the impact of any blockade could be reduced, though it may not be fully offset. 

 

The Habshan-Fujairah crude pipeline, with a capacity of 1.5 million barrels per day, could ease the impact on crude exports as it bypasses the Strait of Hormuz. Saudi Arabia could also divert part of its crude exports to the Red Sea via the East-West pipeline to Yanbu, with a capacity of 5 million barrels per day. Routing ships via the Cape of Good Hope instead of the Strait of Hormuz or the Red Sea would increase transit time to the US and Europe by 10–15 days and reduce effective shipping capacity, the brokerage said.

 

Near-term supply disruptions may persist

India sourced around 50 per cent of its LPG imports in CY25 from Qatar, Kuwait and Saudi Arabia. These supplies have faced disruptions due to operational issues at refineries and logistics constraints. Citing discussions with Aegis management, JM Financial said the government has already undertaken alternative arrangements to avoid supply disruptions. Indian oil marketing companies (OMCs) have signed a deal with the US to import about 2.2 million tonnes of LPG from CY26, accounting for roughly 10 per cent of annual imports.  Around 40 per cent of LPG imports are sourced from the UAE, with Fujairah remaining operational so far. However, production and supply have been fully or partially disrupted across the Gulf region, which accounts for about 33 per cent of global LPG exports, potentially pushing LPG prices higher in the near term.

 

Post-conflict, LNG prices in the region have risen around 40 per cent compared with a 17 per cent increase in propane and butane, suggesting markets are pricing in a sharper disruption in LNG supplies relative to LPG, analysts at JM Financial said. A wider LNG-LPG price gap could support distribution margins for Aegis Logistics, similar to trends seen during the FY24 Russia-Ukraine war, the brokerage added.

Commodity trade disruption

Disruptions in the Gulf region could also affect global trade in aluminium, fertilisers and iron ore pellets. The Gulf accounts for around 15 per cent of global aluminium exports, with major smelters located in Bahrain and the UAE, and contributes about 15 per cent of global iron ore pellets exports. Any disruption could impact commodity markets and potentially boost iron ore pellet exports from India, which had earlier been affected by weak pricing, analysts said. A recovery in iron ore exports would be positive for JSW Infrastructure and Adani Ports, particularly at their eastern ports, the brokerage added.  Disclaimer: The views expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.