Good afternoon, readers. We are kicking off the week with a light issue focusing on India’s diplomatic calls to open up the Strait of Hormuz and de-escalate the conflict. Meanwhile, diversification is the name of the game, with Indian refiners keen to buy Iran’s oil.

Plus: L&T, India’s construction giant, is holding the line for its projects in the Middle East, keeping most of its project sites operational despite the war, though it is keeping a wary eye on looming supply chain bottlenecks.

Watch this space

WAR WATCH — The regional war showed no signs of slowing down over the weekend, as US President Donald Trump’s comments that the war was almost over were swiftly followed by renewed attacks from both sides. Most notably, Israel attacked the South Pars gas field on Wednesday, Iran’s primary energy resource, and Iranian strikes took out 17% of Qatar’s LNG export capacity in retaliation. To top it off, Trump threatened on Saturday night to target Iranian power plants if it doesn’t fully open the Strait of Hormuz in 48 hours.

Iran responded with a threat of its own: “If ⁠Iran’s fuel and energy infrastructure is attacked by the enemy, all energy infrastructure, as well as information technology...and water desalination facilities, belonging to the US and the regime in the region will be targeted pursuant to previous warnings,” Iranian military spokesman Ebrahim Zolfaqari said, according to state media.

Why it matters for India: Iran’s strike on Qatar’s gas facilities threatens to squeeze India's energy supply, as Qatar is the single largest supplier to India, supplying half of the country’s gas demand.

A coalition of more than 20 countries has condemned Iran over attacks on commercial vessels and what it described as the “de facto closure” of the strait. We cover in detail below India’s regional diplomatic outreach calling for deescalation and opening up the maritime routes.

INFRASTRUCTURE — Mumbai-based EPC contractor Larsen & Toubro’s operations in the Middle East remain largely undisrupted, with most project sites continuing operations as normal despite the ongoing conflict, Hindu reports, citing Deputy Managing Director and President Subramanian Sarma. The firm, which derives over 35% of its revenue from the region, said its workforce — including about 8k employees, 2k family members, and 20k contract workers — remains safe, with no evacuation required, Moneycontrol reports.

What’s happening: Around 5% of sites have been temporarily suspended, mainly those located near military bases, either as a precaution or at the customer’s request — prompting the company to pause fresh recruitment in the region.

Supply pressure: Logistics and supply chain disruptions are emerging as the primary risk, with project sites currently holding material buffers of up to three months. Movement of supplies from China and Europe has been affected due to shipping disruptions, while intra-Gulf sourcing remains relatively stable. The company said delays beyond this buffer period could result in revenue losses.

Macro spillover: The company also flagged that higher oil and gas prices could raise India’s import bill, with potential implications for government borrowing and fiscal balances.

Market backdrop: L&T shares are among the worst affected since the war started, declining 22% over the last three weeks. Despite assurances from the senior management about its projects, the company’s stock fell by 2.5% today underscoring the risks to its vast Middle East exposure.

M&A WATCH — India is weighing a partial stake sale in public lender IDBI Bank via an offer for sale to increase public shareholding after scrapping a planned strategic divestment, Hindu Businessline reports. The bank’s low public float of about 5% has constrained price discovery, prompting the government to consider offloading 10-15% in tranches leading up to a clearer market valuation before attempting another sale.

Privatization setback: Earlier this month, the government abandoned plans to sell a 60.7% stake jointly held with Life Ins. Corporation of India (LIC) after bids from Emirates NBD and Fairfax Financial fell below the expected price.

Our take: Despite the sustained investor interest, the failure to close the transactions suggests that Indian regulators and capital-heavy Gulf buyers remain far apart on how to value legacy state-linked assets. Privatization efforts for IDBI Bank date back to 2016, with LIC acquiring control in 2019 to rescue the bank. A renewed push began in 2021, but valuation concerns have repeatedly stalled progress, forcing a rethink of the approach.

Market watch

CAPITAL MARKETS — The INR fell to a record low of INR 93.94 per USD, while government bonds remained under pressure as the Middle East conflict entered its fourth week and oil prices surged, Reuters reports. The benchmark 10-year government bond yield rose to around 6.74%, its biggest weekly increase in three months.

The INR is among the currencies most exposed to rising oil prices and has weakened about 3% since the war began on 28 February. Foreign investors have pulled some USD 9.5 bn from Indian stock markets since the start of the regional war, adding further downward pressure on the currency.

Bond market reaction: Rising oil prices have pushed up inflation expectations and weighed on demand for government securities, with traders expecting the 10-year yield to move in the 6.7-6.8% range in the near term. The Reserve Bank of India net bought INR 767 bn in bonds over two weeks, including INR 195 bn in the week ending 13 March, as it sought to stabilize the bond market.

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Data point

USD 120 bn — That is the projected size of India’s semiconductor market by 2030, nearly tripling from about USD 50 bn in FY 2025, according to a report by Deloitte. The market could expand to USD 300 bn by 2035, driven by rising demand from AI, automotive electronics, and data centers.

IN CONTEXT- India currently imports over 90% of its semiconductors, but domestic production is expected to meet over 60% of demand by 2035 as new silicon and compound fabs, display fabs, and outsourced semiconductor assembly and test facilities come online.

The big story abroad

Most eyes are on the impact of the regional war on financial markets, from crypto to gold and equities.

Asian shares look set for a correction — a 10% decline from a recent peak — as markets fall during early trading on the back of high oil prices and the escalation of the war in the region. Meanwhile, gold slid for the ninth consecutive day, tumbling nearly 4%, and bonds across the world are seeing a selloff.

LNG export declines are also getting attention: Global LNG exports fell to a six-month low this month as Qatar, one of the world’s largest gas producers, had to halt exports due to the disruption of shipping through the Strait of Hormuz and repeated attacks on facilities, according to Kpler data picked up by Bloomberg.

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