Explained: Impact of Iran-US-Israel war on Indian stock market and sectors
Oil-linked stocks, including airlines, paints, and tyre stocks, tumbled in trade on Monday, March 2, 2026 as investors reacted to surging oil prices amid a crisis in West Asia.
Oil, a key input in these industries, soared 9 per cent to $79.42 a barrel earlier today, while US crude climbed 8.6 per cent to $72.61 per barrel amid military strikes between the United States and Israel, and Iran.
Among individual stocks, InterGlobe Aviation (IndiGo) share price tumbled 7.5 per cent, SpiceJet shares crashed 7.2 per cent,
Asian Paints dropped 6.1 per cent, Berger Paints 5.8 per cent, and Indigo Paints 3.9 per cent.
The pain was more pronounced among tyre stocks with JK Tyre plunging 16.11 per cent, Apollo Tyres 11.6 per cent, Tolins Tyres 15.9 per cent, and MRF 4.3 per cent.
Crude oil prices form one of the biggest cost components in these industries.
For airlines, for instance, 30-45 per cent of operating costs are due to fuel expenses. Analysts fear this, along with airspace closures in West Asia, could weigh on the near-term outlook for the sector.
Notably, the Iran-Israel-US war in the Middle East (West Asia) rendered large parts of its airspace as a ‘no-go’ zone, resulting in flight cancellations and rerouting of several services.
The Directorate General of Civil Aviation (DGCA) also asked airlines to avoid 11 countries in the region until March 2, 2026. The order is expected to extend if the conflict persists.
Reports suggest Indian airlines cancelled nearly 179 flights till March 1 midnight (Air India Group: 86; IndiGo: 72; SpiceJet: 13; Akasa: 8).
Further, several long-haul flights have been affected, with Air India cancelling 20 flights to the US, Canada, and Europe.
“This is likely to disrupt international operations, while rerouting would increase flight time and fuel costs. Furthermore, a spike in crude oil prices amid geopolitical turmoil would increase fuel costs, weighing on airline profitability,” noted analysts at Emkay Global Financial Services.
The brokerage, however, expects the airlines to likely pass on a partial increase to customers.
Those at JM Financial, meanwhile, said escalation of conflict in the Middle East presents a near-term negative for IndiGo, driven by disruption to Gulf airspace and potential operational constraints at Dubai - a critical global transit hub - which could temporarily reduce international ASKs, depress connectivity traffic, and lower aircraft utilization.
“Concurrently, a geopolitical spike in crude oil prices poses margin risk given IndiGo’s high fuel cost sensitivity and limited hedging,” the brokerage said.
As per the brokerage’s estimates, every $5 increase in Brent price could hurt IndiGo’s earnings by ~13 per cent, assuming the Indian rupee remains constant.
JM Financial added that if the disruption persists for a fortnight, the estimated ASK loss stands at ~1.3 billion, accounting for a pre-tax loss of around ₹56.5 crore (not accounting for Dubai as a transit hub -- a prolonged disruption could have a higher negative impact).
“This would account for nearly 3 per cent and ~1.4 per cent of profit before tax (PBT) for Q4FY26 and FY26 respectively (assuming PBT/ASK at ₹0.44/ASK in Q4FY26),” it said.
The brokerage said that a swift de-escalation would likely see operations and bookings normalize quickly, but a prolonged disruption risks capacity rationalisation, margin compression, and estimate
“We, therefore, view the situation as tactically negative in the immediate term, with the duration of airspace restrictions and crude price trajectory remaining the key variables for stock direction,” it said.
Auto, cement, shipping stocks in focus
Meanwhile, in the automobile sector, oil and oil derivatives are used as inputs in synthetic rubber tyres, Engine oils, lubricants, and plastics in vehicle interiors.
Separately, in the infrastructure and construction sector, bitumen (from crude refining) is used for making roads, diesel is used as fuel for heavy machinery, while petrochemical-based construction materials are used across the infra/cement sector.
Among cement stocks, Ultratech Cement shares fell 2.4 per cent, Ambuja Cements 3 per cent, and Shree Cement 3.9 per cent.
For the shipping industry, fuel (bunker fuel) accounts for 30–50 per cent of voyage operating costs.
JM Financial estimates that the closure of the Strait of Hormuz and potential disruptions to travel via the Red Sea could flare up freight rates and increase the timeline uncertainty of cargo transport via these routes.
AIAE has a 65 per cent export share (in FY25 versus peak of 80 per cent in FY21) and direct exposure of 6.6 per cent of volumes (8MFY26) to Middle East based on trade data.
“The major impact can come from the rise in ocean freight rates (freight share already up 300bp Y-o-Y to 9.3 per cent in Q3FY26), which can impact near-term margins and slow down conversion from forged media (in case, customers anticipate supply disruptions),” the brokerage said.
Given this, Great Eastern Shipping Company shares declined 3.3 per cent, and Shipping Corporation of India shares 4.9 per cent.
Paint stocks take a hit
Paints are heavily dependent on crude derivatives, especially for materials like Resins, Solvents, Monomers, and Additives. A large part – almost 60 per cent -- of their raw material costs are linked to crude or petrochemicals.
Higher crude oil prices lead to higher resin and solvent prices which may, in turn, dent gross margin of paint companies.
According to a report by Business Standard, amid sluggish growth for organised players in the paints industry, pricing pressures could constrain operating profitability in the near-term.
 "Oil price surge hits airlines, tyre stocks; IndiGo slides 7%, JK Tyres 16%")
