Wars are perilous affairs, but the one currently underway in West Asia is especially so. It is now in its second week and impacting the Indian economy widely. Prices are rising and shortages are appearing resulting in black marketing. Agriculture, textiles, tiles, glass, plastics, hotels, restaurants, airlines and energy-intensive products are already impacted. More the war drags on, worse will be the impact. There are mixed signals as to how long the war may last, thereby creating a huge uncertainty. Ministers are putting up a brave front, saying all is in control. But the impact of the war is global and that will also boomerang on the Indian economy.US hegemonyUSA and its proxy Israel started bombing Iran and killed its topmost leader and much of its defence leadership right at the start of the war. The hope that this would lead Iran to capitulate and a new pliant leader of their choice could be installed has been belied. US hoped that this would enable it to gain control over the entire West Asia via an unchallenged Israel. After all, it is Iran that has stood in the way of complete US control over this important energy-rich region.The US was emboldened by its illegitimate capture of President Maduro of Venezuela. So Iran became the next target for gaining greater control over global energy resources and making the US the predominant global power. China and Russia, the other global powers, have been unable to stall these moves. US President Donald Trump has used patently false excuses to act against Venezuela and Iran. Maduro was supposedly pushing drugs into the US and Iran was said to be on the verge of acquiring nuclear bombs and attempting to assassinate President Trump. Little evidence of any of this has been presented to the world. One is reminded of the Iraq war waged by the US on the false pretext that Iraq possessed so-called weapons of mass destruction.President Trump’s moves are a gambit to shore up American domination – MAGA is his goal. He threatened takeover of Greenland and now it has come to Cuba. He threatened Colombia and Mexico and enunciated a present-day Monroe Doctrine for Latin America. He wanted Canada to become a state of the United States of America. Imperialism is back in full force. Tellingly, the US unabashedly renamed its Department of Defence the Department of War, which it has been waging from of its 750 overseas bases.Iran fighting backIran is not Venezuela. It did not cave in despite massive bombing, decapitation of its leadership and loss of air force and navy power. Though weakened, it has retaliated against Israel and the US bases in West Asia. It had been preparing for such an attack from them. In the recent past, it lost top generals because Mossad and the CIA had moles in the country’s top leadership. Besides, electronic surveillance is available for precise targeting.Learning from this, the Iranian leadership installed a decentralised command system so that the next level of leadership could quickly take charge if one flank was assassinated. President Trump has threatened to eliminate this line of leadership as well. The war can drag on.A man and woman carry a liquified natural gas cylinder for household after refilling it in Ahmedabad, India, Wednesday, March 11, 2026. Photo: Ajit Solanki/AP.The US claims that it has degraded Iran’s capability to fire missiles and drones at its bases or inside Israel. But Israeli and American defences against incoming Iranian missiles and drones also seem to have degraded. Some of the missiles are getting through, damaging critical infrastructure. No doubt, without air defence, Iran is being pummeled, but it is still retaliating as much as it can.Critically, Iran has control over the passage of ships through the Strait of Hormuz. At least 20% of world’s crude and as much of LNG passes through this channel. Hundreds of ships are stranded in and around the Gulf as a result. Some have been attacked, making the dangers shippers are exposed to very real. The US Navy is not escorting ships through the Strait of Hormuz yet. Can it do that and reopen shipping is a big question. For now, despite Trump’s claim that the Iranian navy lies at the bottom of the ocean, the channel remains closed. If ships passing through are sunk, passage through the strait may remain closed even after the war.Sectoral impactIran has attacked airports and critical infrastructure in the Gulf region. No wonder Gulf nations have pleaded with the US not to attack Iran. They knew they would get sucked into the war because they host US bases, which would have been used to attack Iran. Events have proved them right. Not only is their crude stuck, they have had to curtail production and they face attacks against their infrastructure. Even after the war ends, they would not be able to immediately ramp up production. So energy shortages will persist for some time.Crude oil is not only used to power machines but it is a rich source of chemicals – much of the world’s sulfur and raw material used in fertiliser, cooking gas, plastics, synthetic yarn, etc. depends on mineral oil processingf. So while energy shortages will impact all production, prices of certain commodities will rise even more. Traders will not only speculate but indulge in black marketing – as is happening in India with LPG supplies. Hotels and restaurants across the country face LPG shortages and are reportedly paying huge premiums for the fuel or even shutting down.STORY | Monitor LPG supply, prevent hoarding, black marketing of cylinders: Centre to statesThe Centre on Wednesday advised all the states and Union territories to monitor LPG supplies daily, take strict action against the violators, quell rumour mongering and maintain law and… pic.twitter.com/Y84EPOcXxO— Press Trust of India (@PTI_News) March 11, 2026With air and sea routes disrupted, trade and travel around the Gulf – a critical region that connects the west with the east – has virtually stopped. Airlines and shipping companies are adversely impacted. People are stuck. And overall trade is falling. Insurance rates have risen and war premiums have been scrapped. Many ships are choosing to navigate around Africa’s coast, raising transport cost and disrupting supply chains.Energy is used in the production of everything we use, and then in transporting and distributing it from farms and factories to consumers. Any price hike lifts all prices, creating a cascading effect of inflation. Agriculture will be hurt by the shortage of fertiliser and higher irrigation costs, not to mention the final transport costs.Rising food prices will then impact workers everywhere. Difficulties in travel will impact hotels and the entertainment industry.Macro impactPrice increases will be only one of the macroeconomic effects of the unfolding crisis. Output, growth, investment, employment, export, import, capital flows and balance of payment will all be impacted. As inflation rises faster, demand will decline and businesses will reduce production, lowering economic growth rates.War has fuelled the uncertainty already sparked by the Trump tariffs and preexisting conflicts and wars in other parts of the world. It will aggravate the slowdown in investment and put downward pressure on growth. This uncertainty and the decline in the value of dollar relative to other currencies will lead finance to move into gold and silver, and further speculative price rise and then a further decline in investment in the real economy and share markets.Rising crude prices, along with the cost of LPG, gold, etc., will inflate India’s import bill. India’s exports to the Gulf region of tea, rice, vegetables, meat, engineering goods and much more will be adversely impacted, especially with shipping and flights in a state of near-freeze.India’s trade deficit will grow, leading to an outgo of foreign exchange. This will weaken the rupee, which will continue to depreciate against most currencies. The return to foreign capital in dollar terms will then be hurt, and still more dollars will flow out of India. In the last five months, the net FDI has been negative and portfolio investments have been leaving the country. The trade deficit, which is usually covered by capital flows, will now be exposed to more crosswinds.The government says there are one crore Indians in West Asia. Remittances and deposits from them into Non-Resident Indian (NRI) accounts are substantial. These will also decline, further weakening capital flows. Many NRIs are seeking to return due to the conflict and the decline in production in West Asia. This will hurt the already precarious employment situation in India.The extent of these macro and micro impacts will depend on how long the war continues. If it had been a matter of a week, the effects would have been marginal and reversible. Now that it has gone on for longer, the repercussions look more serious and less temporary. Both Pete Hegseth, the US Secretary of War, and Trump have said the attacks may go on indefinitely – until the Iranian leadership is displaced and a “regime change” occurs.A delivery worker rides past a restaurant closed due to shortage of commercial liquefied petroleum gas (LPG) cylinders, in Chennai, Tuesday, March 10, 2026. Photo: R Senthilkumar/PTI.But regime change requires ground troops to get involved. That would get murky – as seen in Iraq and Afghanistan not long ago. In Iraq, US forces kept fighting on the ground for eight years after President George Bush had declared victory. In Afghanistan, after two decades of fighting, the Taliban is back in power with the US acquiescing.Also read: Indians in Dubai Hold on to its ‘Safe Haven’ Image, Even Amid Missile StrikesTherefore, if the Iranians do not capitulate and keep the Strait of Hormuz blocked, there will be bad news for the global economy. The world could slip into stagflation or recession, or both, depending on how long hostilities last. The only beneficiaries will be in the military industrial complex as armament expenditures will skyrocket. They were already high due to the Russia-Ukraine war and Israel’s expeditions in Palestine. It is reported that the US spent, in just the first two days of its war on Iran, USD 5.6 billion. Such massive expenses will be at the cost of socially beneficial goods and services, and it will hurt the poor the most.What can be done?India’s weakness in technology has limited its strategic autonomy. It is overly dependent on the US and has also drifted away from Russia. Trump has exploited that to extract trade concessions from India. We have been told to not buy crude oil from Russia, open our agriculture, buy USD 500 billion worth from the US, balance our trade with its imports from us, and so on. Because we have been playing ball, the Treasury Secretary gave India a certificate of being “good actors”. The US has “allowed” India to purchase Russian crude that is already on the high seas for just thirty days. But India has been told that it will not be given access to technologies, lest, like China, it later challenges the US.So the immediate question is how India should deal with these myriad challenges brought by the war. It needs more energy. Russia is a possible source. The US and Venezuela are other, though more expensive, sources. Given global shortages of crude and LNG, prices will remain elevated and India’s balance of payment will remain under pressure. India could begin to use its strategic oil reserves, which may see it through for some time. The G7 grouping is considering using its strategic reserves.India’s pro-US and pro-Israel stance has cooled its relationships with Russia and weakened its position on the BRICS platform created by developing nations. Its moral standing in the world has suffered. Russia is unlikely to supply cheap crude oil under the circumstances. India needed to be equidistant in world affairs. Can it change course now, as it confronts massive challenges – including how the US is treating it?Also read: Modi Government’s Ill-Conceived Policy on West Asia Jeopardises India’s Interests, CredibilityIndia will have to depend more on its internal market as exports suffer. The unorganised sector can be such an additional market – provided its employment ability is boosted and incomes rise. For instance, if we sell less of textiles or food items abroad, the surplus can be absorbed by the vast number of poor in the unorganised sector – but that is only possible if incomes in the sector also rise.Further, fuel can be saved through appropriate policies like minimising the use of private vehicles by encouraging public transportation (such as through taxation policies). Checking the black economy would curb needless consumption and the social waste it causes. These and many other such polices will reduce the energy intensity of the economy and make it less prone to energy and other similar shocks.ConclusionThe ongoing war is resulting in growing uncertainty, shortage of energy globally, increase in energy prices and adverse impact on output and investment. Now in its second week, the impact of war on the Indian economy is apparent. The longer it will last, the worse its effects will be.The war is an expression of a new wave of unabashed imperialism practiced by the US. On false pretexts it is attacking other nations and extracting concessions, including from its closest allies, Canada, Japan and the European Union. The world is being pushed towards bilateralism and away from multilateralism. So, new alignments are likely to form with USA seen as unreliable and hegemonic. Undoubtedly, terrorism impacts nations. But, imperialism today, in the name of checking terrorism is upending the world.Professor Arun Kumar is a retired professor of economics at Jawaharlal Nehru University. He is the author of Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead (Penguin Portfolio, 2020).In this article, Colombia was mistakenly referred to as Colombo earlier. The error has been corrected and the article is republished at 12.03 pm IST on March 12, 2026.