West Asia Conflict Triggers Economic Shocks in India: FPI Outflows, Oil & Coal Prices Soar
The ongoing war in West Asia is sending significant economic jolts through India, with foreign portfolio investors (FPIs) intensifying their selling spree in the equities markets. Last week, net outflows reached a staggering Rs 35,475 crore, according to data from the National Securities Depository Limited (NSDL). This trend reflects growing global concerns and geopolitical unpredictability, prompting a cautious approach from international investors.
FPI Selling Spree and Market Volatility
Monday witnessed the largest selling of the week, with net outflows of Rs 10,827 crore. This was followed by sales of Rs 9,406.78 crore on Tuesday and Rs 4,376.02 crore on Wednesday. Thursday was a settlement holiday due to the Gudi Padwa festival, but selling resumed on Friday with stocks valued at Rs 10,965.74 crore being offloaded. March 2026 has recorded the largest monthly outflow of the year so far, with FPIs selling a total of Rs 88,180 crore, highlighting the severe impact of the conflict on investor confidence.
Coal Imports Decline Amid Supply Disruptions
The conflict has also hit India's coal sector hard. Coal imports fell by 4.2 percent to 213.10 million tonnes (MT) during the April–January period of the current fiscal year. This decline is primarily due to rising seaborne costs, and imports are expected to remain low for an extended period. While this underscores India's efforts to boost self-sufficiency in coal production, the geopolitical unrest has led to supply shortages, causing domestic output to jump and global thermal coal prices to increase.
Non-cooking coal imports during the same period dropped to 127.80 MT from 141.18 MT in the previous fiscal year, as reported by mjunction services ltd, a B2B e-commerce platform and joint venture of SAIL and Tata Steel.
Oil and Petrol Prices Surge
The ripple effects of the West Asia conflict have extended to petrol and oil prices in India. On Friday, the price of premium or higher-grade petrol jumped by Rs 2 per litre, while bulk diesel sold to industrial customers increased by nearly Rs 22 per litre. International oil prices peaked at US$119 per barrel on Thursday before declining to around US$108 per barrel. In Delhi, regular petrol still costs Rs 94.77 per litre, and diesel of the same grade is priced at Rs 87.67 per litre.
LPG Cylinder Prices Rise, Adding to Household Burdens
Furthermore, the cost of domestic cooking gas cylinders (LPG) has increased by Rs 60, making it more challenging for ordinary households, small businesses, and homemakers to manage expenses amid the war. A 14.2 kilogram household LPG cylinder now costs Rs 913 instead of Rs 853, with updated prices effective from March 7. Commercial LPG cylinders (19 kilogram) have seen a price hike of Rs 115. Gas traders suggest that the government may have raised prices in anticipation of supply disruptions due to escalating Middle East tensions.
Future Economic Risks and Outlook
Looking ahead, the ongoing conflict in West Asia is expected to have short-term impacts on India's remittances and crude oil imports, as highlighted by SBI's economic research department and FICCI in their reports. They warn that a prolonged war and higher oil prices could slow down economic growth, widen India's current account deficit (CAD), and push up inflation. These factors pose significant risks to the stability and growth of the Indian economy in the coming months.
