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In This Economy: Ships, Straits And Standoffs

Geopolitical tensions made a comeback this week as Iran and Israel are now lodged in armed conflict

<div class="paragraphs"><p>The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. (Photo source: Freepik)</p></div>
The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. (Photo source: Freepik)

Hi,

This won't be a Happy Tuesday, as India is still reeling under the tragic loss of lives in the AI 171 crash in Ahmedabad. The administration has moved swiftly to aid all affected citizens, with DNA verification of remains in its final stages. This will likely give some respite to grieving families as they proceed with final rites. 

The crash has claimed the lives of 241 passengers and crew members aboard the flight. Only one passenger managed to escape largely unscathed. Air India and its owner, Tata Group, have vowed financial support to family members of all those who perished on the flight.

But the crash did not just affect those on the plane. The men's hostel of BJ Medical College, a popular medical school in Ahmedabad, was the crash site and has led to the death of many of its inhabitants and injury for others. These young doctors in training were merely eating lunch when the plane crashed near their mess hall.

That this happened in my hometown, in an area I am familiar with, hits too close to home. As Ahmedabad, Gujarat, and India grieve with families of those who lost their lives, this newsletter also stands with them. 

Onto this week's edition.

GEOPOLITICS RULES HEADLINES AGAIN

Geopolitical tensions made a comeback this week. Iran and Israel are now lodged in armed conflict, with both nations continuing to send missiles at each other till Sunday night, affecting civilian and military casualties. 

The global powers are nervous because of the potential impact on the Strait of Hormuz, which is a key gateway for trade. So far Iran has maintained that the strait remains open, but any blockages could hurt the free movement of goods around the world and disrupt global trade. 

Crude oil prices jumped to the $74 mark from the benign $65 levels earlier.

At the time of writing this newsletter, the conflict has only escalated, with US President Donald Trump calling for Tehran to "evacuate", deriding Iran for not signing the nuclear deal. The US also skipped the G7 nation's resolution which recognised Israel's right to defend itself and for peace and stability to return to the Middle East. Trump left the G7 meet earlier than other leaders, as the White House claimed that he had to "attend to many important matters".

The Indian markets have, more or less, shrugged off the nervousness around the conflict, though. At the time of writing this newsletter on Tuesday, the Sensex was at around 81,666, down just 0.16%, while the Nifty 50 was trading at 24,890, down 0.22%. 

This is largely because fears of any disruption in crude oil and the resultant impact on domestic inflation seem overblown.

In FY25, India imported crude oil worth $143.1 billion, translating to an estimated 202.7 million tonnes, according to data from the Petroleum Planning & Analysis Cell and GTRI. A bulk of this came from Russia, Iraq and Saudi Arabia.

Sources in the government confirm that India does not depend much on Iranian oil. In fact, India has not imported oil from Iran since 2020. We have enough resources to last us for three months; in case the conflict escalates, these sources said. That seems enough time to figure out any alternatives, if necessary. 

What will likely get affected, though, is trade. According to available data, the Baltic Dry Index, which determines the cost of shipping dry goods across the world, has risen 50% in the last month. That has a bearing on the cost of exports and delays in order completion. Indian government sources recognise the disruptions in the Red Sea and the Strait of Hormuz, and a meeting of all shipping companies has been called for. 

Hopefully the conflict ends soon and global trade comes back to normalcy.

FEATURE FIVE

In an exclusive interview with NDTV Profit, Defence Secretary Rajesh Kumar Singh talks about how India plans to tackle global supply chain hassles.

As the Karnataka government bans bike taxis in the state and Bengaluru grapples with the loss of a key public transport mechanism, Haripriya Sureban answers this key question: Can a passenger be a parcel?

UGro Capital's decision to issue cumulative convertible debentures worth Rs 1315 crore has investors up in arms. Sajeet Manghat explains why.

The Enforcement Directorate is raising questions about some ex-cricketers endorsing illegal betting apps. Shrimi Choudhary tells us more in this exclusive report.

At Rs 2,400 crore, the Air India crash in Ahmedabad is going to be India's largest insurance claim. Pallavi Nahata talks to experts to decode the number.

CAUGHT MY EYE

Bouncers are no longer a feature of high-end restaurants and your favourite bar in Khar. AGS Transact Technologies, an ATM cash handler, has not paid its employees as it deals with the fourth month of financial struggles. When employees went to seek compensation, they were met with bouncers who refused to let them in to meet chairman Ravi Goyal. Moreover, people can't quit because the HR team has decided to not show up for work themselves. Read Agnidev Bhattacharya's fantastic piece on the company's struggles here.

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