Spikes in crude prices tend to stabilize once disruptions become clearer and strategic reserves or alternative supply routes are activated, according to Anand Shah, chief investment officer-portfolio management services and alternative investment funds at ICICI Prudential Asset Management Co.
Shah said, in an interview with Mint, even during the Russia-Ukraine crisis, crude prices initially surged but eventually moderated as markets adjusted.
He added that apart from geopolitical tensions, key risks for Indian markets include global liquidity conditions, movements in crude oil prices, and the availability of liquefied petroleum gas (LPG) and oil, as rising household energy costs could disrupt consumption momentum. Edited excerpts:
The commentary on the US-Israel-Iran war remains mixed. Even after announcements that the war may end soon, strikes continue. How does that affect market sentiment, especially after we saw some buying during the week?
Markets typically react first to headlines and then gradually reassess fundamentals. The initial buying seen on 10 March reflected optimism that the conflict may de-escalate. However, the continuation of strikes keeps uncertainty elevated, and market sentiment therefore remains fragile in the near term.
There is no doubt that the current situation, in which the Strait of Hormuz is disrupted and energy flows are affected, is a significant negative for the global economy, including India. India imports approximately 80% of its oil, 50% of its liquefied natural gas (LNG) and 80% of its LPG requirements. Higher prices, alongside limited availability, have the potential to disrupt the economy's smooth recovery.
What investors must remember is that until 27 February 2026, India’s long-term growth story remained firmly intact. Events like these tend to delay economic momentum temporarily rather than derail it. We saw a similar pattern during the Russia-Ukraine conflict, where markets initially corrected sharply but later stabilized as investors recalibrated the actual economic impact.
At this stage, the key unknowns are the timeline and severity of the conflict. That uncertainty is what is currently keeping markets volatile. What transpires over the next two to three months remains critical.
Does that mean the fear of rising crude oil is behind us?
It would be premature to say the fear of rising crude oil is completely behind us. Crude markets tend to price geopolitical risks quickly, especially when conflicts involve major energy corridors.
Historically, however, such spikes tend to stabilize once supply disruptions become clearer and strategic reserves or alternate supply routes are activated. Even during the Russia-Ukraine crisis, crude prices initially surged but eventually moderated as markets adjusted.
The key variable today remains the duration of the conflict and the risk of further escalation.
What are the key risks for the Indian market apart from the war-related situation?
Apart from geopolitical tensions, key risks for Indian markets currently include global liquidity conditions, movements in crude oil prices, availability of LPG and oil, and currency volatility.
Additionally, domestic factors such as rising household energy costs could disrupt consumption momentum. Fiscal discipline could also come under pressure in the near term if petroleum revenues decline and subsidy burdens increase.
Among sectors that use crude and crude derivatives, which sectors are relatively insulated from high crude prices?
India is predominantly a consumption-driven economy, and energy is central to almost every sector. As a result, very few industries remain insulated from the impact of high energy prices over the long term.
However, sectors that rely primarily on domestic coal as their energy source—such as power utilities and select metal producers—are likely to be relatively less affected by rising global energy prices.
There is a competing force for gold now. Geopolitical risks are pushing prices higher, while inflation worries driven by crude could pressure it. How do you view gold?
In the near term, geopolitical risks may continue to support gold prices. However, over the medium to long term, gold prices are largely driven by the US dollar, which in turn is influenced by real interest rates and inflation expectations.
Before the conflict began, the US dollar was weakening as markets grew concerned about the size of the US fiscal and current account deficits. Expectations of interest-rate cuts, combined with tariff-driven inflation pressures, also contributed to this trend.
The closure of Qatar’s LNG processing facilities has taken 50% of Indian LNG imports off the market. If LNG distribution is prioritized, petrochemical companies may see supply cuts. How does this affect the sector?
To understand the impact, it is important to first look at India’s LNG dependency. India imports roughly 50% of its natural gas requirement in the form of LNG, making it structurally reliant on global gas markets. Within that, supply concentration is quite high. From a logistics standpoint, the Strait of Hormuz is a critical chokepoint, with around 60% of India’s LNG imports transiting through this route.
If LNG supply constraints persist, petrochemical companies could face short-term input cost pressures or supply disruptions. Typically, in such situations, governments prioritize power generation, fertilizers and city gas distribution over petrochemical usage.
For petrochemical companies, this may lead to near-term margin pressure as feedstock costs rise or supply chains tighten. Further, the shortage of LPG has also led the government to direct refiners to maximize LPG production at the cost of other derivatives, thereby complicating operational efficiency and petrochemical integration.
Has the war altered your investment thesis? Have you reshuffled your portfolio?
The core investment thesis has not changed. As mentioned earlier, India’s long-term growth trajectory remains intact, and we continue to believe structural drivers of the economy will support gradual growth improvement.
Geopolitical events like these can delay economic momentum temporarily, but they rarely derail long-term structural growth stories. Our portfolio positioning, therefore, continues to focus on businesses with strong balance sheets, pricing power and long-term earnings visibility.
You have exposure to metals and mining in your contra fund. What is the investment rationale?
Over the last decade, the metals and mining sector has gone through a prolonged, difficult cycle. Between 2010 and 2020, excessive global capacity—largely driven by China—led to weak commodity prices, poor profitability, and significant leverage across producers. Since then, the industry has undergone meaningful balance sheet repair.
Many Indian metal companies have reduced debt, improved efficiencies, and exited loss-making assets, structurally strengthening their businesses. We built exposure to metals and mining in 2021.
While we have varied exposure based on other opportunities, India has natural advantages in ferrous metals, aluminium and zinc, along with rising domestic infrastructure demand. Given these strengths and improved company balance sheets, metals remain part of our portfolio. That said, after a strong recent performance, our exposure today is somewhat lower than earlier.
Commodity sectors often go through periods of underperformance, during which valuations become attractive relative to their long-term earnings potential. In such phases, contrarian investing allows the accumulation of fundamentally sound companies that may benefit when the cycle turns.
Do you see AI-related investments increasing? Could foreign investment flows increase if valuations correct, given that India offers no meaningful AI exposure beyond some data centre-related players?
AI is emerging as a major global investment theme. Indian companies, particularly in technology services and digital infrastructure, are increasingly investing in AI capabilities.
If valuations in Indian equities correct meaningfully, this could attract incremental foreign institutional flows, especially given India’s positioning as a technology and services hub.
How do you view the liquidity crunch in global private credit? Is India seeing similar trends?
Globally, certain segments of private credit have experienced tighter liquidity as interest rates increased and refinancing costs rose. However, the situation in India is somewhat different. The domestic private credit ecosystem is still evolving, and capital availability remains relatively healthy for well-structured deals backed by strong sponsors.
What should investors do in the current conflict situation? What type of funds should they consider?
Periods of geopolitical uncertainty naturally lead to higher volatility in equity markets. However, history shows markets tend to recover once clarity emerges.
Investors should therefore avoid making abrupt portfolio decisions based on headlines. Instead, they should remain focused on long-term asset allocation and continue investing through diversified equity strategies with embedded risk-management frameworks.