MSMEs Likely to Face Severe Impact Due to Israel–Iran Conflict; CICU Urges Government to Secure Alternative Raw Material Supplies

Ludhiana, March 10, 2026: The escalating conflict between Israel and Iran is expected to disrupt global supply chains and could significantly affect India’s Micro, Small and Medium Enterprises (MSMEs), particularly manufacturing units dependent on imported raw materials. The Chamber of Industrial & Commercial Undertakings (CICU) has expressed serious concern over the possible economic fallout of the conflict, warning that the sector may face sharp increases in input costs, supply shortages, and operational disruptions if timely measures are not taken.
According to CICU, the geopolitical tensions in the Middle East — a region that plays a critical role in global energy and petrochemical supply — could lead to volatility in crude oil markets and disrupt the availability of several key industrial inputs used by MSMEs across India. Industrial clusters such as Ludhiana, which house thousands of small and medium manufacturing units, are particularly vulnerable to such disruptions.
One of the most immediate concerns highlighted by CICU is the likely surge in the prices of plastic raw materials. Industry estimates suggest that prices of certain petrochemical-based inputs could increase by up to 60 percent if supply routes remain disrupted or crude oil prices continue to rise. Such an increase would severely affect plastic processing units and MSME manufacturers that rely heavily on imported polymers and petrochemical derivatives.
CICU has also raised alarm over the potential shortage of industrial gases such as oxygen, argon, and acetylene, which are essential for manufacturing processes including welding, cutting, and fabrication. These gases are widely used in the production of automotive components, machinery parts, and engineering products — sectors where MSMEs play a dominant role. Any disruption in their supply could slow down production lines, delay order deliveries, and increase manufacturing costs.
Steel and engineering units are also likely to face operational challenges due to the limited availability of industrial gases used in steel processing and metal fabrication. CICU warned that if the supply chain remains strained, many MSME units may be forced to reduce production capacity, which could eventually affect employment and order commitments to larger manufacturers.
Another emerging concern relates to the availability of commercial gas used by industries, commercial establishments, and households. Reports of limited supply in some regions have already started creating anxiety among industrial units. CICU stated that continued shortages could hamper production activities in MSMEs that depend on gas-based heating, welding, and fabrication processes. At the same time, commercial establishments and households may also face inconvenience due to restricted supply for daily consumption.
Beyond raw materials and gas supply, CICU has also pointed out broader economic risks arising from the conflict. Rising freight and shipping costs, potential disruptions in maritime trade routes in the Middle East, and currency volatility could further increase the cost burden on exporters and manufacturers. MSME exporters, particularly those shipping goods to Europe, the Middle East, and Africa, may face longer transit times, higher logistics costs, and delays in international payments.
Expressing its concerns, CICU has written to the Hon’ble Union Minister of Commerce and Industry, Shri Piyush Goyal, urging the Government of India to take proactive steps to protect the MSME sector from the cascading effects of the conflict. The chamber has requested the government to explore alternative international sources for critical raw materials, ensure uninterrupted supply of industrial gases, and closely monitor abnormal price escalation in essential industrial inputs.
CICU has also recommended a balanced allocation of available commercial gas supplies to avoid disruption in economic activity. The chamber has suggested that approximately 30 percent of the available gas supply should be allocated for industrial and commercial use while 70 percent may be reserved for household consumption. Such a balanced distribution, it said, would help sustain manufacturing operations while safeguarding domestic needs.
Commenting on the situation, Upkar Singh Ahuja, President of CICU, said that the MSME sector has only recently begun stabilizing after the severe disruptions caused by the COVID-19 pandemic. “Industry is still in a recovery phase, and another global supply shock could place immense pressure on MSMEs that operate with limited financial buffers,” he said.
Ahuja further stated that MSMEs form the backbone of India’s manufacturing ecosystem and contribute significantly to exports, employment, and industrial growth. “If raw material prices rise sharply or supplies become inconsistent, it could affect production schedules, increase working capital requirements, and reduce competitiveness of Indian manufacturers in global markets,” he added.
CICU has urged the Government of India to closely monitor the evolving geopolitical situation and take timely policy measures to safeguard domestic industry. Ensuring stable raw material supply, controlling speculative price increases, and supporting MSMEs during this period of global uncertainty will be crucial to maintaining industrial stability and protecting jobs, the chamber said.
The chamber emphasized that proactive intervention at this stage could help cushion the impact of global tensions on India’s MSME sector and ensure that manufacturing growth and export momentum are not adversely affected.