Impact of Iran Conflict on Indian Cooking Oil Market

The ongoing conflict in Iran is causing significant disruptions in the Indian cooking oil market, particularly affecting sunflower oil supplies. With prices soaring and availability dwindling, consumers are increasingly turning to cheaper alternatives. Crisil Ratings predicts a nearly 10% decline in refined sunflower oil volume this fiscal year, driven by supply chain issues and rising logistics costs. Despite these challenges, refiners are expected to maintain profitability due to strategic inventory management and the ability to pass on price increases. This article delves into the implications of these market dynamics and the potential shifts in consumer preferences.

By Narendra Chaudhary Apr 2, 2026, 13:08 IST

Challenges in Indian Cooking Oil Supply

The ongoing conflict in Iran has significantly affected Indian kitchens, leading to disruptions in LPG supplies, which in turn has caused increased costs and reduced availability. The situation is worsening, with cooking oil now facing similar challenges. According to Crisil Ratings, the volume of refined sunflower oil in India is expected to drop by nearly 10% in the current fiscal year due to two main factors that will suppress demand. First, supply chain issues stemming from the Middle East conflict, and second, rising prices due to escalating logistics costs, are likely to push consumers towards more affordable alternatives like rice bran and soybean oils. Despite this decline in volume, revenues are projected to remain stable as higher prices will compensate for the drop in sales volume.

Profitability and Market Dynamics

Furthermore, the profitability of sunflower oil refiners is anticipated to remain steady, as gains from previously acquired low-cost inventory will help mitigate the negative impact of reduced sales volume. Crisil Ratings based its analysis on nine sunflower oil refiners, which represent approximately 70% of the industry revenue, estimated at Rs 36,000 crore. Market data indicates that prices for refined sunflower oil and palm oil, commonly used in households, have surged by nearly 30% since early March. For instance, the price of refined sunflower oil rose from Rs 130 per litre on March 1 to Rs 185 by March 31, while palm oil prices increased from Rs 117 to Rs 160 during the same period, disproportionately affecting low- and middle-income families.

Short-Term Inventory Tightening

Inventory levels to tighten for short term

The report further noted that rising crude oil prices and supply chain constraints will lead to tighter inventory levels for domestic sunflower oil refiners in the short term. This situation may temporarily free up working capital, thus improving cash flows. Additionally, strong financial positions are expected to maintain stable credit profiles for these refiners. A significant portion of sunflower oil imports comes from Ukraine and Russia. Due to the ongoing conflict in West Asia, shipping routes have lengthened, with vessels now taking longer paths, such as around the Cape of Good Hope, which increases both distance and transit time. Furthermore, vessels navigating through conflict-prone areas are facing higher war-risk insurance premiums, resulting in increased landed costs for crude sunflower oil for Indian refiners.

Shift Towards Alternative Oils

Consumers to look for Sunflower oil substitute

Currently, retail prices for refined sunflower oil are between Rs 170-175 per litre, compared to approximately Rs 150 per litre in January 2026. Given that rice bran and soybean oils are available at a discount of Rs 10-20 per litre compared to sunflower oil, a partial shift towards these alternatives is anticipated. Consequently, demand for sunflower oil is projected to decline by around 10% in fiscal 2027. The report also highlighted that despite the expected decrease in volume, refiners' profitability is likely to remain robust, as they can pass on price increases to consumers, albeit with a delay of 10-15 days. Additionally, refiners have implemented strong hedging strategies to mitigate potential price risks.