The ongoing geopolitical tensions in the Middle East—triggered by the Iran conflict—are significantly impacting fertilizer markets, with implications for global food inflation. More than half of the region’s urea output may have been disrupted since the onset of the conflict, as per CRU Group estimates, with nearly 55–60% of production potentially halted. The effective closure of the Strait of Hormuz has severely constrained shipments of urea, a critical input for nitrogen-based fertilizers. Given that nearly 45% of global urea trade originates from producers located along the Persian Gulf, exports to key markets such as India, Europe, and Brazil are facing significant bottlenecks, tightening global supply.
Meanwhile, diplomatic developments remain fluid. Donald Trump and his national security team have expressed skepticism over Iran’s proposal to reopen the Strait and defer nuclear negotiations, as reported by The Wall Street Journal.
Although the proposal has not been outright rejected, concerns persist regarding Iran’s willingness to engage in good faith particularly around core demands such as ending nuclear enrichment. In parallel, Axios reported that Iran, via Pakistani mediators, has submitted a revised proposal to the White House; however, the US response remains uncertain.
Against this backdrop, global economic policymakers are preparing contingency responses. In Germany, the Finance Ministry has indicated a willingness to consider suspending its constitutionally mandated debt brake as an emergency measure to cushion potential economic fallout.
In contrast, China has demonstrated resilience despite global headwinds. Industrial profits rose 15.8% YoY in March, driven primarily by strong performance in equipment and high-tech manufacturing sectors, according to the National Statistics Bureau, even as tighter global energy markets continue to pose external risks.
On the domestic front, National Statistics Office (NSO) has proposed leveraging aggregated GST data to construct an Index of Service Production (ISP), with FY25 as the base year, aiming to enhance real-time tracking of services sector activity.
Simultaneously, India has strengthened its global trade positioning by signing a comprehensive free-trade agreement with New Zealand. The agreement—expected to be operational by year-end—grants India 100% duty-free access, alongside a committed $20 billion FDI inflow over 15 years and improved labor mobility provisions. While India will liberalize ~70% of tariff lines (covering ~95% of New Zealand’s exports), it continues to safeguard sensitive sectors such as dairy, sugar, and edible oils.
Encouragingly Private sector participation in capex rebounded in FY26, with its share in new projects exceeding 70%, driven by a 51.5% YoY rise in investment commitments to ~₹41 trillion, while government capex grew ~1%. However, momentum slowed in Q4FY26, with announcements falling to ₹8.6 trillion from ~₹16 trillion in prior quarters, amid West Asia-related uncertainties.
Lastly, the Reserve Bank of India has introduced final guidelines for transitioning to an Expected Credit Loss (ECL)-based provisioning framework, marking a significant shift in banks’ credit risk assessment practices. The norms remain largely unchanged from the draft issued in October, notably retaining a 5% provisioning requirement for Stage 2 loans, despite industry requests for relaxation aligned with non-performing asset provisioning standards.
Asian market
Asian market opened mixed today as investors weighed developments in US-Iran negotiations. Overnight in the US, the S&P 500 and the Nasdaq Composite rose to new record highs but gains were limited as stalled Iran peace talks and a fresh escalation in the Strait of Hormuz pushed oil prices higher.
Brent: 102.39, US10Y: 4.34%, DXY: 98.54 GIFTNIFTY: -0.11%