The ongoing geopolitical tensions in the Middle East, primarily stemming from the Iran conflict, are significantly affecting fertilizer markets and contributing to global food inflation. Estimates from the CRU Group indicate that over half of the region’s urea output may be disrupted due to the conflict, with production potentially halted at a rate of 55–60%. The effective closure of the Strait of Hormuz has severely limited urea shipments, a crucial component of nitrogen-based fertilizers. As nearly 45% of global urea trade comes from producers in the Persian Gulf, exports to major markets such as India, Europe, and Brazil are experiencing serious bottlenecks, tightening global supply.
In the realm of diplomacy, developments remain fluid. Reports from The Wall Street Journal state that Donald Trump and his national security team have expressed skepticism concerning Iran’s proposal to reopen the Strait and to defer nuclear negotiations. While the proposal has not been outright rejected, there are ongoing concerns regarding Iran’s commitment to engage in good faith, especially on vital demands like ceasing nuclear enrichment. Additionally, Axios reported that Iran has submitted a revised proposal through Pakistani intermediaries to the White House; however, the U.S. response remains uncertain.
In response to the potential economic fallout, global policymakers are preparing contingency plans. The German Finance Ministry has signaled its readiness to contemplate suspending its constitutionally mandated debt brake as an emergency measure.
Conversely, China has shown resilience amid global economic pressures, with industrial profits increasing by 15.8% year-on-year in March, primarily driven by strength in equipment and high-tech manufacturing sectors, according to the National Bureau of Statistics. Nonetheless, tighter global energy markets continue to pose external risks.
Domestically, India is enhancing its global trade position by finalizing a comprehensive free trade agreement with New Zealand, expected to take effect by year-end. This agreement will grant India 100% duty-free access and aims to attract a committed $20 billion in foreign direct investment (FDI) over 15 years, along with improved labor mobility provisions. While India will liberalize approximately 70% of tariff lines—covering about 95% of New Zealand’s exports—it remains protective of sensitive sectors including dairy, sugar, and edible oils.
Additionally, private sector investment in capital expenditures has rebounded in fiscal year 2026, with its share in new projects exceeding 70%. This increase is attributed to a 51.5% year-on-year rise in investment commitments, totaling approximately ₹41 trillion, while government capital expenditure grew by about 1%. However, momentum appears to have slowed in the fourth quarter of FY26, as announcements dropped to ₹8.6 trillion from approximately ₹16 trillion in previous quarters amid uncertainties related to West Asia.
Furthermore, the Reserve Bank of India has released final guidelines for transitioning to an Expected Credit Loss (ECL)-based provisioning framework, representing a significant alteration in banks’ credit risk assessment practices. The norms have largely remained unchanged from the draft issued in October, notably maintaining a 5% provisioning requirement for Stage 2 loans, despite requests from the industry for relaxation in line with non-performing asset provisioning standards.
In Asian markets, trading opened on a mixed note as investors evaluated developments in U.S.-Iran negotiations. On the previous night, the S&P 500 and the Nasdaq Composite in the U.S. reached new record highs, although gains were moderated by stalled peace talks with Iran and a fresh escalation in the Strait of Hormuz that drove oil prices higher. Current figures include Brent crude at $102.39, the U.S. 10-Year Treasury yield at 4.34%, and the DXY at 98.54, with GIFTNIFTY registering a decline of 0.11%.
