Ongoing West Asia conflict to discourage investment into India, offset trade deal positives: BMI

BMI warns that the ongoing West Asia conflict may deter investment in India, impacting GDP despite positive trade deal prospects.

Fitch Group company BMI on Tuesday (March 3, 2026) said that the ongoing conflict in the Middle East could discourage investment in India, and offset the positive effects of trade deals with the EU and U.S. on GDP.

Despite the favourable readings of policy uncertainty so far in 2026, BMI kept the FY2026/27 growth outlook unchanged, projecting a 7% GDP expansion. It, however, flagged risks to the outlook but said it is currently assessing the geopolitical situation to quantify its impact on India's GDP.

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"From March onwards, we expect uncertainty to increase sharply due to the ongoing conflict in the Middle East. We believe this will discourage investment in India, offsetting the (EU and U.S.) trade deals' positive effects on GDP," BMI said in its India outlook report.

The U.S. and Israel jointly launched military strikes on Iran on February 28. Iran responded by firing drones and missiles at Israel and U.S. military installations around the Gulf, and also at the global business hub of Dubai.

BMI said that Iran has issued threats to ships traversing the Strait of Hormuz, and a full closure of the Hormuz Strait could directly reduce GDP by up to 0.5 pp through higher energy costs.