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Iran war batters India: Factories go dark, basmati rice piles up at ports as Hormuz crisis deepens

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The tremors of war in Iran have reached deep into the Indian economy, halting factory floors, stranding the country’s prized basmati rice exports, forcing airlines to cancel hundreds of flights, and driving restaurants to temporarily shutter. Businesses across the subcontinent are now grappling with fractured shipping lanes and surging fuel costs that show no sign of abating.

Now in its thirteenth day, the conflict has all but paralysed maritime traffic through the critical Strait of Hormuz, sending freight costs sharply higher. Of all Asian economies exposed to a prolonged conflict and shipping blockade, India stands among the most vulnerable. Roughly 50% of the country’s crude oil imports transit the strait, and according to data from Kpler, fully 89% of India’s liquefied petroleum gas (LPG) supply passed through that chokepoint in 2025.

Late Monday, New Delhi activated emergency measures to guarantee that households and vehicles running on compressed natural gas (CNG) receive first priority access to whatever domestic gas supplies remain.

“The problem is no longer just price — we are now confronting a supply crisis,” Madhavi Arora, Chief Economist at Emkay Global, told Nikkei Asia.

Ceramic factories on the brink

The gas shortage threatens to bring the ceramic industry in Gujarat — the home state of Prime Minister Narendra Modi — to a standstill. India concentrates roughly 90% of its ceramic production in the city of Morbi. Of approximately 700 factories there, between 400 and 450 rely on propane to fire their kilns. Manoj Arvadiya, President of the Morbi Ceramic Association, said that close to 100 of those facilities have already closed.

“If propane supplies are not restored within 10 days, all of our factories could be facing shutdown,” Arvadiya warned.

The gas crunch has also forced temporary closures of restaurants in major cities, with hospitality industry bodies sounding the alarm.

Vijay Shetty, President of the Hotel and Restaurant Association of India, said roughly 20% of restaurants and hotels in Mumbai have temporarily shut their doors, warning that the figure could climb to 50% within days if the LPG supply crisis persists. “There is acute distress across [the state of] Maharashtra,” Shetty said.

Social media has been flooded with accounts of restaurants rationing fuel, cutting operating hours, and switching to induction cooktops, resulting in sharply reduced menus. The National Restaurant Association of India estimates that even a single day’s supply disruption costs the sector up to 13 billion rupees ($141 million).

Textiles and manufacturing squeezed

Textile manufacturers have not been spared. Ashwin Chandran, Chairman of the Confederation of Indian Textile Industry, said freight costs for shipments to Europe have surged approximately 40%, jumping from roughly $2,200–$2,300 per container to more than $3,000.

Chandran also flagged a 30% increase in polyester prices tied to the sharp spike in crude oil. “Polyester usage has been significantly impacted because it may not be possible to pass on the price increase under short-term existing contracts,” he said.

Brent crude has whipsawed violently over the past three trading sessions: it surged to nearly $120 per barrel on Monday, retreated to approximately $83.50 on Tuesday, then clawed back toward $100 on Thursday as the Trump administration sent contradictory signals about the trajectory of the war. Prices remain more than 66% higher year-to-date.

A recent note from ICICI warned that sectors relying on petroleum derivatives — among them paints and tyres — face mounting margin compression as prices stay elevated.

Exports snarled, rice stranded

The conflict is also choking export markets. According to a report by investment advisory firm ICRA, approximately 14% of India’s total exports are destined for West Asia — a degree of exposure significantly higher than that of ASEAN nations, where West Asia accounts for roughly 5% to 10% of total exports, according to Emkay Global’s Arora.

Among India’s largest export categories, basmati rice has been particularly hard hit. Satish Goel, President of the All India Rice Exporters Association, said India ships 6 million metric tons of rice annually, with approximately 75% bound for Gulf states. Goel estimated that around 400,000 tons of rice — worth roughly $1,000 per ton — is currently stranded at sea or piling up at Indian ports.

Airlines ground flights as fuel costs bite

The closure of airspace over Iran and surrounding conflict zones has forced hundreds of flights onto longer re-routing, driving up fuel burn, according to ICRA. Its report noted that, as of March 5, Indian carriers had cancelled more than 1,700 flights — equivalent to approximately 46% of their international operations.

Air India announced Tuesday that it would impose fuel surcharges on both domestic and international routes in response to a “sharp rise” in jet fuel costs, cautioning that without such surcharges, certain flights would be economically unviable and subject to cancellation.

Markets on edge at a sensitive moment

The cascading effects of the war have arrived at a delicate juncture for Indian financial markets. Foreign investors have been net sellers of Indian equities to the tune of more than 830 billion rupees this year, unnerved first by uncertainty surrounding a US-India trade deal and now by the ongoing conflict. Threats of AI-driven disruption have weighed on technology shares, and despite a correction of more than 8% in the benchmark Nifty 50 this year, large-cap stocks continue to trade at relatively elevated valuations — a point flagged in recent notes by both Nomura and Morgan Stanley.

Following the eruption of the energy and shipping crisis, Morgan Stanley downgraded India from overweight to equal-weight, citing these compounding risks alongside the country’s historically adverse sensitivity to oil price shocks.

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Pentagon plans covert spy ring for economic war on China, report says

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The US Department of War (Pentagon) is reportedly planning to establish an extensive network of deep-cover agents to wage economic warfare against China and other adversaries of the US.

According to a report by The Washington Post citing six sources familiar with the initiative, the plan has not yet been put into effect. The newspaper reported that the initiative remains at the planning stage. The Pentagon, however, denies that any such initiative exists.

The report said the operatives would pose as entrepreneurs or private sector employees while concealing their ties to the US government. The network’s mission would be to gather economic intelligence and counter China.

The programme is led by Tom Rakusa, who spent 39 years at the CIA. Rakusa serves as a senior adviser to Deputy Secretary of Defence Steve Feinberg.

The proposed spy network is seen as part of a broader policy by the Donald Trump administration to sharpen economic competition with other countries.

The US is already resorting to tariffs, export controls, and investment in strategic sectors, alongside expanding its economic intelligence gathering.

According to The Washington Post, the new initiative demonstrates the Pentagon’s growing influence under the Trump administration. The department is currently seeking a record budget of $1.5 trillion.

Trade war flares up again with Trump’s return to the White House

The trade friction between the US and China flared up again following Donald Trump’s return to the White House. In April 2025, Washington raised tariffs on Chinese goods to as much as 145%, and Beijing retaliated with tariffs of up to 125%.

In May, US Secretary of State Marco Rubio described China as the primary geopolitical challenge facing Washington. Rubio said that to avoid war, the two sides needed to manage their conflict of interests.

In July, Chinese expert Zheng Yongnian did not simply warn that underestimating the US could prove to be a “fatal mistake”; he stated it explicitly.

According to Zheng’s assessment, the US maintains its primacy through the role of the dollar, its military superiority, and its technological advantages.

Even so, the two sides agreed in June to declare a truce and lower tariffs. In autumn 2026, the US and China extended their trade truce until 10 January 2027.

US Treasury Secretary Scott Bessent said the extension would give the parties more time to discuss economic issues.

Trade deals do not eliminate the strategic contradictions between the two countries. Financial Times columnist Rana Foroohar likened the race between the two nations for commercial, technological, and geopolitical influence to the 19th-century “Great Game” between the Russian and British empires.

Foroohar cited China’s standing in shipbuilding and commercial maritime transport, as well as its expanding footprint in overseas ports, among its key advantages.

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Japan plans curbs on short-term home sales to cool urban prices

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Japan’s ruling Liberal Democratic Party (LDP) plans to restrict short-term property trading to rein in surging home prices in major urban centres, particularly Tokyo.

Led by Prime Minister Sanae Takaichi, the party aims to make support for working households a core priority ahead of local elections scheduled for April next year.

The LDP’s research commission on housing and land policy met on Wednesday to discuss the issue.

According to a report by the Nikkei Asia newspaper, Commission Chair and LDP lawmaker Midori Matsushima said at the opening of the meeting: “Prices of newly built condominiums across Tokyo’s 23 wards have doubled over the past decade. We must work on measures ensuring that people who wish to live in these homes can actually afford to buy them.”

Homeownership in the capital has become virtually unattainable for broad segments of the population. According to data from the Real Estate Economic Institute, the average sale price of a newly built condominium in Tokyo’s 23 wards rose %18.5 in fiscal 2025 compared with the previous year, reaching 137.84 million yen (around $872,000).

Meanwhile, statistics from the Ministry of Labour show that the average annual income of a full-time worker in the capital remained at 6.78 million yen in fiscal 2025. This widening gap between incomes and residential property prices is directly shaping political priorities.

During its campaign for the House of Representatives election in February, the LDP pledged to curb speculative transactions across metropolitan Tokyo and other regions. Earlier this month, a party project team focused on policies concerning foreign nationals also submitted a recommendation urging the government to introduce immediate tax measures against rising home prices.

Under current legislation, profits realized from properties sold within five years of acquisition are classified as “short-term capital gains”. These returns face a tax rate approaching %40, including income tax and local inhabitant tax.

Although this rate is twice the approximately %20 levied as “long-term capital gains” tax on properties held for more than five years, several party members argue it remains insufficient to deter speculation. Calls to tighten the framework may be considered as part of the annual tax reform package to be drafted in December alongside the LDP’s coalition partner, the Japan Innovation Party.

The ruling bloc wants to present concrete housing pledges to voters heading to the polls in April across numerous urban centres, including 22 of Tokyo’s wards where local assembly terms expire.

“We need to support families with children, who are typically at the stage of purchasing a home,” a senior LDP official said.

Opposition parties are also preparing alternative proposals that target not only prospective homebuyers, but also residents forced into the rental market by high property prices and now affected by escalating rents.

Tax steps take precedence over limits on foreign buyers

Several countries seeking answers to housing affordability pressures have imposed direct restrictions on foreign purchasers. In South Korea, real estate policies played a major part in the declining public approval ratings of President Lee Jae Myung.

In August 2025, authorities in Seoul introduced an approval requirement for foreign nationals buying homes in the capital and adjacent areas, while also mandating that buyers reside in the properties for at least two years.

Canada and Australia have enacted temporary bans on foreign residential purchases, while Singapore levies a %60 additional stamp duty on foreign buyers.

The role of overseas investors in Japan’s property market also drew debate during the February election. However, restrictions aimed directly at foreign nationals are viewed as potentially conflicting with international trade and services agreements.

Consequently, rather than imposing restrictions based on the nationality of buyers, the government is discussing tax measures aimed at speculative real estate deals, such as rapid resales.

Fears that sharp market measures could shake regional banks

Concerns have also surfaced that aggressive steps to force down prices could harm the wider national economy.

A senior LDP tax official cautioned that a steep drop in land prices could weaken local financial institutions, warning: “We must consider the impact on regional banks.”

The real estate sector accounts for roughly %18 of total lending by Japanese banks. This proportion sits well above the %10 level recorded during Japan’s bubble economy of the mid-to-late 1980s.

At certain regional banks, property lending accounts for nearly half of total loan portfolios.

According to March 2025 data from the Financial Services Agency, approximately one-quarter of all loans extended by regional banks to the real estate sector are concentrated directly in Tokyo’s five central wards.

Buoyant asset valuations, supported in part by rising stock indices, have underpinned strong public approval for the Takaichi administration. Observers note that property interventions designed to cool the market could drag down equity prices and weaken the government’s standing.

A senior official on the LDP research commission stressed that decision-makers must act with caution regarding the scope and timing of any measures intended to bring price increases under control.

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South Korea plans $120B spend on eight US nuclear power plants

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South Korea will spend $120 billion to construct eight nuclear power plants in the US under an agreement that provides for $350 billion in investments in exchange for lower tariffs.

The South Korean government also announced that Seoul and Washington will begin examining a liquefied natural gas (LNG) project in Alaska comprising a large-scale pipeline to transport natural gas from the north of the state to the south, alongside the construction of an LNG terminal for exports overseas.

Seoul stated that a decision regarding the LNG project will be made following a commercial feasibility study. However, US President Donald Trump said that South Korea would invest $54 billion in the project, pointing to an apparent lack of full coordination between the two sides on the matter.

Trade and Industry Minister Kim Jung-kwan said in a statement: “This announcement opens a new horizon of cooperation where the two countries join forces to develop joint commercial ventures in strategic areas directly linked to economic security and future sectors such as artificial intelligence, nuclear energy, and LNG.”

“We will adhere to the principle of prioritising national interests and investing solely in commercially viable projects,” Kim said.

Speaking at the White House, Trump characterised South Korea’s plans as “one of the largest energy infrastructure investments in American history”.

The announcement followed a meeting between Trump and South Korean President Lee Jae Myung roughly one year ago at the APEC Economic Leaders’ Meeting held in South Korea, where they agreed on the creation of a $350 billion investment fund.

Under that agreement, $150 billion was allocated to the shipbuilding sector and $200 billion to other sectors. In return, the US announced it would reduce tariffs imposed on goods imported from South Korea from 25% to 15%.

Under the nuclear power project, South Korea’s state-controlled utility will build two plants in the US, while Pennsylvania-based Westinghouse Electric will construct six plants.

According to the South Korean government, this will mark the first instance in which a foreign country builds its own nuclear power plants in the US.

South Korean firms are also evaluating the possibility of acquiring a stake in Westinghouse as part of negotiations over sharing profits generated by the project.

South Korea additionally announced that it will build a $22.3 billion natural gas-fired power plant in Texas with a capacity of 6,472 megawatts.

The facility will be designed to supply electricity directly to nearby data centres. The project’s first phase is targeted to begin commercial operations in 2029, with full-capacity operations slated for 2032.

Seoul also disclosed that it had agreed to allow the US to receive 50% of the profits generated by the projects until South Korea recoups all of its investments.

After South Korea fully recovers its total investment amount, 90% of the profits will go to the US.

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