Uncertainty amid the Iran War: Why the answers to India’s external troubles lie squarely at home

A face in Greek mythology is said to have launched a thousand ships. In contemporary times, there is a world leader who has been subjected to multiple names. US president Donald Trump has been called many things, especially in his second term, but the term ‘neo-royalist’ has gained much traction.

In a Foreign Affairs article, Harvard University professor Stephen M. Walt called him a “predatory hegemon.” There have been other appellations too: realist, isolationist, mercantilist, nationalist, imperialist. The list will definitely expand during the remainder of his presidency.

Immediately, though, America’s unilateral attack on Iran may fetch Trump some more names, but they would be materially different from all the previous ones.

This is because willy-nilly the conflict has multiple business dynamics at its core. The official reasons behind the Iran attacks, ostensibly at the prodding of Israeli Prime Minister Benjamin Netanyahu, are still unclear with the goalposts being shifted every day: while one day it was obliterating Iran’s nuclear capability, the next day it was regime change. But, through this all, somebody or some people are making a lot of money.

Take oil, a commodity that sees prices spike every time there is a conflict in West Asia. Spot Brent crude prices on the New York Mercantile Exchange have jumped by around 37% in less than three months. Brent is the benchmark for over 65% of the world’s globally traded oil, which includes oil from the Gulf region. In sympathy, spot West Texas Intermediate prices—a benchmark for North American oil—also jumped over 37% during the same period, even though most of its originating oilfields are far removed from the conflict zone.

Leading US oil company ConocoPhillips has seen its share price jump by 30% during the same period. Ditto for many other US-based oil companies. No prizes for guessing the winners here.

Here is an interesting aside. Trump and his officials promised to solve the looming oil shortage by declaring that the US navy would escort tankers through the narrow Strait of Hormuz, as well as pledging that US government agencies will underwrite political risk insurance for tankers. And then, just about when spot Brent crude prices were about to relent, a US submarine sank an Iranian warship on 4 March. The next morning, Brent crude price resumed its northward journey.

The scent of a war has always benefitted defence company stock prices. Lockheed Martin, a leading US-based aerospace and defence technology company, has seen its stock price shoot up by over 50% in less than three months. The stock price of Northrop Grumman, another large defence contractor for the US government, is up by around 38%.

The war effort is quietly mining another goldfield. Columbia University professor Rajiv Sethi has been writing regularly about how anonymous punters have made tidy sums betting on prediction markets (such as, Polymarket or Kalshi) about the exact date of Nicolás Maduro’s abduction or the precise dates of US strikes on Iran. News agency Associated Press reported mid-February that two Israelis had been charged for using classified information to place bets on future military operations (tinyurl.com/y6hua84r).

While all this points to a clear emerging trend (and perhaps deserving of an appropriate moniker), it makes planning and strategy a quagmire. In fact, whatever the motivations and rationales for the war, it has profound consequences for India’s energy security.

As an economy dependent on net imported petroleum products, India’s dilemma will be whether to reach out to Russia again for cheaper oil, with full knowledge of the likely punitive consequences. There are multiple cost-benefit angles to consider when weighing, on one hand, cheaper oil from Russia coupled with probably higher US tariffs against more expensive oil from the US but lower import tariffs on the other.

The big unknown here is the duration of the conflict. Add to this the artificial intelligence disruption coming down the road, which is likely to undermine India’s services export capabilities, a crucial source of support for the country’s balance of payments.

In short, when added to the cumulative effect of elevated energy costs, weak capital flows and a currency under pressure, both inflation and growth rates are likely to feel the impact.

India will need to explore multiple scenarios to reinforce its economic and strategic security. In all economic negotiations over the past 30 years, India has used its market size and demographics as a bargaining chip. However, there are now signs that negotiators on the other side of the table see this as jejune and fraying.

It is clear that the government has to get back to basic economic principles and policies that prioritize private sector investment and domestic employment, away from a misplaced focus on sectarian politics.

The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal