Global markets face rising strain as supply chain tightens and oil risk persists: Neelkanth Mishra

As the global economy navigates a fragile recovery, emerging disruptions in supply chains and energy markets are raising concerns about growth prospects. Recent remarks by Neelkanth Mishra, Chief Economist, Axis Bank & Head Of Global Research, Axis Capital highlight how close the world may be to a turning point.

Over the past month, much attention has been focused on mid-April as a critical deadline for supply chain normalization. As of today, that timeline appears to have shifted slightly—but not without warning signs.

“So, the inventories are running dry,” Mishra noted in an interview to ET Now, pointing to visible stress across sectors. In India, the impact is already evident. “We already have signs like in India the plastics market, the furniture makers are now priced out. So plastic chairs, tables, those are not being manufactured.”

He added that several projects are stalled due to shortages of essential materials, while even international aviation is feeling the pressure. “There are airlines from Europe which have stopped flying to Thailand and Vietnam because they cannot get refuelled at those airports.”

Despite these disruptions, some degree of adjustment is underway. According to Mishra, consumption patterns and resource allocation have become more efficient, buying the system a bit more time. “The system seems to be calibrating much more efficiently and therefore maybe there is a couple of weeks extra of inventory.” However, he cautioned that this buffer is limited. “I must say that the product inventories are now starting to hit precarious levels… maybe it is 30th of April, but it is not 30th of May.”

Oil Markets: Short-Term Volatility, Long-Term Questions
Alongside supply chain concerns, oil markets remain under scrutiny. While prices have fluctuated, Mishra emphasized the importance of looking beyond immediate contracts. “The best measure of this is what is the oil price average over the next 12 months,” he explained, noting a divergence between current physical prices and future expectations.

Although there has been a noticeable increase in average oil prices, he does not expect a rapid return to pre-conflict stability. “Clearly, I do not think there will be complete normalisation very quickly. Inventory buildup will happen. People will focus on resilience a lot more and therefore demand goes up.”

Recent developments, including production adjustments by oil-producing nations, further complicate the outlook. “These countries are now filling up their oil reserves and therefore being forced to cap oil wells,” he said, suggesting that prolonged uncertainty could delay market stabilization.

Strait of Hormuz: Costs vs. Real Risks
Speculation around potential transit fees in the Strait of Hormuz has also surfaced, but Mishra downplayed its global impact. “I do not think it is going to be a meaningful one,” he said, estimating that such costs would translate to roughly “a dollar per barrel.”

Instead, he urged attention toward a more pressing issue: refined products. “What people are perhaps forgetting is the availability of products, meaning refined products,” he pointed out. With a significant portion of global refining capacity concentrated in the Gulf region, disruptions here could have immediate consequences.

“There will be products where the challenges will be a lot more severe,” he warned, citing concerns over bunker fuel and aviation turbine fuel shortages. Restarting damaged refinery infrastructure, he added, remains a major uncertainty.

India’s Energy Exposure: A Temporary Risk?
For India, the question is whether higher energy costs are here to stay. Mishra remains cautiously optimistic. “I do not think so,” he said when asked if the country should brace for a structurally higher oil bill.

He framed the current tensions within a broader geopolitical context, distinguishing between different levels of conflict. “What is happening in Iran is somewhere between a battle and a campaign, most likely still a battle,” he explained, contrasting it with larger systemic rivalries.

However, he acknowledged India’s vulnerability due to its dependence on imported oil and gas. “It is very important for us that we address that strategically,” he said, advocating for accelerated electrification and energy reforms. “So about 15% of our energy is consumed in the form of electricity… we need to electrify a lot more.”

Encouragingly, he pointed to early signs of transformation within India’s power sector, emphasizing the need for sustained momentum.

Still, the current crisis may not be prolonged. “I am of the view that the vulnerability that we have on oil and gas and the import dependency is not going to be tested for beyond say six or nine months.”

A Narrow Window
As April progresses, the global economy appears to be operating within a narrowing window of resilience. While adaptive mechanisms have delayed immediate fallout, underlying pressures are mounting.

Whether supply chains stabilize in the coming weeks—or tip into deeper disruption—could determine the trajectory of global growth in the months ahead.