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US-Iran Conflict to Dent Q4FY26 Earnings, Supply Chains May Take 2 Months

The ongoing US-Iran conflict is projected to negatively affect corporate earnings in the fourth quarter of FY2026, with effects spilling into Q1FY27. Supply chain disruptions are expected to take one to two months to normalize even after the Strait of Hormuz reopens. While the overall impact on Nifty earnings is estimated at 1-2% for FY27, small and mid-cap companies may face steeper downgrades. Market estimates have not yet fully priced in the conflict's impact, though prospects for peace and a U.S. suspension of airstrikes have spurred a recent market rally.

Key Points: US-Iran War Impact on FY26 Earnings, Supply Chain Report

  • Earnings impact in Q4FY26 & Q1FY27
  • Supply chains need 1-2 months to normalize
  • Nifty earnings may see 1-2% hit for FY27
  • SMID firms face higher relative downgrades
  • Market estimates yet to factor in conflict
2 min read

US-Iran conflict to hit Q4FY26 earnings, supply chain restoration may take 1-2 months: Report

Report warns US-Iran conflict to hit Q4FY26 corporate earnings, with supply chain restoration taking 1-2 months after Strait of Hormuz reopens.

"We expect some impact on 4QFY26 earnings, with a spillover to 1QFY27. - Emkay Research Report"

New Delhi, March 25

The ongoing US-Iran conflict is expected to impact corporate earnings in the fourth quarter of FY2026, with the effect likely to extend into the first quarter of the next financial year, according to a report by Emkay Research.

The report stated that supply chain disruptions caused by the conflict will take time to normalise, even after the reopening of the Strait of Hormuz.

"We expect some impact on 4QFY26 earnings, with a spillover to 1QFY27. Supply chains are likely to take 1-2M to normalize after the Strait of Hormuz reopens," the report noted.

It added that damage to energy infrastructure in the Middle East could further delay the full normalisation of oil markets, prolonging the impact on businesses.

According to the report, the overall earnings impact on the Nifty is estimated at around 1-2 per cent for FY27E. However, small and mid-cap (SMID) companies are likely to face relatively higher downgrades, although the impact is expected to remain limited to one to two quarters.

The report also highlighted that market estimates have not yet fully reflected the impact of the conflict.

"Notably, the street is yet to react to the war, with both Nifty and broader market estimates unchanged in Mar-26," it said.

Despite the ongoing uncertainty, global markets have shown signs of recovery. The report noted that global markets rallied, while crude oil prices declined sharply, with Brent crude falling by 12 per cent.

This movement was driven by the United States' decision to suspend airstrikes on Iran's energy infrastructure, citing ongoing talks and the possibility of peace.

However, uncertainty remains as Iran has denied being in direct or indirect talks with the United States, even as US President Donald Trump claimed that "very good and productive conversations" are taking place.

The report stated that although the Strait of Hormuz remains closed, the likelihood of peace appears high and is considered the base case scenario.

It added that such developments could be a strong positive for India, with expectations that the Nifty could rebound after a five per cent decline in the last three trading sessions.

The report suggested that while the immediate impact of the conflict will be visible in near-term earnings, the broader effect may remain contained if the situation stabilises in the coming months.

- ANI

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Reader Comments

P
Priya S
The report seems optimistic about peace, but 1-2 months of supply chain disruption is no small thing. Our SMEs and mid-cap companies will feel the pinch the most. Time to be cautious with investments for the next quarter.
A
Arjun K
Global conflicts affecting our earnings again. We need stronger strategic oil reserves and alternative trade routes. The Strait of Hormuz situation shows our over-dependence. Jai Hind, but we must become more self-reliant.
S
Sarah B
Interesting analysis. The market hasn't priced this in yet, which means there could be volatility ahead. As an expat investor in India, I'll be watching the SMID space closely. The 1-2% impact on Nifty seems manageable if peace holds.
V
Vikram M
With due respect to the analysts, reports often swing between extreme fear and optimism. The base case of peace is good, but what's the plan if talks fail? We need clearer contingency strategies from our financial leaders, not just projections.
K
Kavya N
The silver lining is the predicted rebound. A 5% decline followed by a recovery could be a buying opportunity for long-term investors. Our economy has weathered bigger storms. This too shall pass. 🙏

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