West Asia crisis fuels energy worries for India, domestic inflows cushion growth: Jefferies

Escalating geopolitical tensions in West Asia, notably involving Iran and the strategic Strait of Hormuz, may pose near-term dangers to India via increased power costs, although the nation’s home financial momentum stays comparatively resilient, in keeping with a report by Jefferies.

The report highlighted that world power markets reacted sharply to the developments, with Brent crude rising almost 13 per cent and European pure gasoline costs surging round 55 per cent within the week following the escalation.

Based on Jefferies, the spike in costs was pushed by considerations over a doable disruption within the Strait of Hormuz—a essential world oil delivery route via which a good portion of the world’s crude provide passes.

Any disruption on this hall may hit oil-importing economies like India by elevating import prices and including stress on inflation. India imports greater than 80 per cent of its crude oil necessities, making it notably delicate to world power worth volatility.

Regardless of these dangers, the report famous that monetary markets have up to now reacted cautiously, with buyers more and more treating geopolitical shocks as non permanent occasions relatively than long-term disruptions.

Jefferies mentioned robust home capital flows proceed to offer a serious cushion for India’s fairness markets. Systematic Funding Plan (SIP) contributions averaged round ₹305 billion (about $3.4 billion) per 30 days throughout the three months to January 2026, reflecting sustained retail investor participation.

As well as, the government-backed Nationwide Pension System (NPS) is contributing roughly $1.4 billion per 30 days to equities, a pattern that’s anticipated to strengthen additional over time.

These regular home inflows have helped offset international investor outflows and supported market valuations.

The report additionally pointed to indicators of cyclical acceleration within the Indian economic system. Mortgage development has risen to 13.6 per cent year-on-year as of February 15, up from a current low of 9 per cent in Might 2025.

Company efficiency has additionally improved, with earnings development for firms underneath Jefferies’ protection accelerating to 18 per cent year-on-year within the December quarter — the quickest tempo in eight quarters.

Nevertheless, Jefferies flagged some longer-term challenges for the Indian economic system, notably the potential impression of synthetic intelligence on the nation’s IT providers sector, which employs round six million folks.

AI-driven automation may scale back demand for conventional outsourcing providers, posing structural dangers to one in all India’s largest employment-generating sectors.

On the similar time, the report mentioned world provide chain shifts may benefit India, as multinational firms diversify manufacturing away from China and different East Asian economies towards different manufacturing hubs.

General, whereas geopolitical tensions in West Asia might create short-term volatility via power costs, robust home liquidity and enhancing financial indicators proceed to help India’s development outlook.