📈 Iran Conflict: Risks & Selective Opportunities for SL Economy

A report by First Capital Research (March 2026) highlights that while escalating Mideast tensions pose risks to inflation and trade, specific sectors may see structural gains. • Macroeconomic Impacts: • Energy: Brent crude rose 6–10% to US$ 95–110 per barrel, threatening higher domestic fuel and electricity costs. • Currency & Yields: The Rupee settled at Rs. 309.24 against the USD; a 5% annual depreciation is forecasted. Emerging market bond yields are under pressure as capital shifts to safe-haven US Treasuries. • Inflation: Higher freight rates and insurance premiums due to maritime disruptions are expected to increase import costs. • Sector & Trade Breakdown: • Tea, Coffee & Spices: Nearly 25% of these exports are directed to affected regions (US, Iran, Iraq, Gulf), facing risks from logistics costs. • Logistics & Transshipment: Shipping diversions around the Cape of Good Hope could reinforce Colombo’s role as a key Indian Ocean hub, benefiting maritime services. • Remittances: While regional instability risks disruption, a moderate conflict could increase Gulf labor demand, supporting migrant worker inflows. • Financial Markets: • Equities: The S&P SL20 fell over 5% on March 3, triggering a trading halt. • Outlook: Market corrections may create entry points in logistics and export-oriented sectors if fundamentals hold.