India's Perfect Storm
The Iran war that began on February 28 has triggered what economists are calling India's most severe external shock since COVID-19. Unlike a single-vector crisis, this is a cascading, interconnected chain of disruptions hitting every corner of the economy simultaneously.
The Chain Reaction
Impact on the Common Indian
McKinsey Framework: Interconnected Risk Map
| Risk Factor | Direct Impact | Secondary Impact | Severity |
|---|---|---|---|
| Oil > $100 | Import bill +$15B | Fiscal deficit widens 0.3% GDP | Critical |
| LPG shortage | 300M households affected | Restaurant industry shutdowns | Critical |
| Rupee at 92.43 | Import costs surge | Corporate dollar debt burden | High |
| FII outflows | Market crash | Consumer confidence decline | High |
| Inflation risk | Cost of living increase | RBI policy dilemma | Medium-High |
What Happens Next?
The prediction markets are pricing a 60% chance of further 5-10% market decline if the war continues, and only a 22% probability of ceasefire before April. For India, the path forward depends entirely on geopolitical developments in the Strait of Hormuz.
The government's response so far — LPG Control Order, RBI FX intervention, increasing non-Hormuz oil sourcing from 60% to 70% — addresses symptoms but cannot solve the fundamental vulnerability: India imports 85% of its oil and 62% of its cooking gas.
This crisis will reshape India's energy policy for a generation. The question is how much pain comes first.