Synopsis: L&T stock fell over 22 percent amid the Middle East crisis, but 95 percent of operations remain unaffected. While supply chain risks persist, strong order inflows and cost pass-through strategies may limit financial impact.
The Iran-Israel war in 2026 is a major Middle East conflict that began after joint U.S. and Israeli airstrikes on Iran’s military and nuclear sites. In retaliation, Iran launched missile and drone attacks on Israel and U.S. bases, escalating tensions across the region. The war has caused heavy civilian casualties, disrupted global oil supplies, and raised fears of a wider regional conflict.
Apart from these sectors, a major engineering and infrastructure player has also seen its stock getting affected by going down by more than 22 percent since the war began. The company operates in construction, and EPC projects, and the rising fuel costs and geopolitical tensions could impact project execution, margins, and overseas business operations of this company.
With a market cap of more than Rs 4.55 lakh crore, Larsen & Toubro Ltd saw its stock hit an intraday low of Rs 3305 which is 4 percent lower than the previous close of Rs 3434, which the company’s stock has given a compounded return of 17 percent in the last three years.
Larsen & Toubro or L&T is a premier Indian multinational conglomerate specializing in EPC projects, high-tech manufacturing, and services. Operating in over 50 countries, it leads in sectors like infrastructure, power, hydrocarbon, and defense. L&T is renowned for engineering excellence, executing large-scale, complex projects that drive global industrial and economic growth.
Management’s say
Larsen & Toubro stated that around 95 percent of its operations remain unaffected by the ongoing geopolitical tensions involving Iran and the US. The company highlighted that its projects continue to progress normally, with minimal disruption so far, reflecting strong execution capabilities and diversified geographic exposure across key infrastructure and energy markets.
However, the company acknowledged emerging concerns around supply chain disruptions, particularly for projects linked to the Middle East. Any prolonged conflict could impact logistics, material availability, and project timelines. While current operations remain stable, future uncertainties could pose risks to execution efficiency and cost structures if tensions escalate further.
Financials
In the latest quarter, the company saw a YoY revenue growth of 10 percent, going from Rs 64,668 Cr in Q3FY25 to Rs 71,450 Cr in Q3FY26, while the QoQ went up by 5 percent from Rs 67,984 Cr in Q2FY26. The YoY Net Profits fell by 4 percent, going from Rs 3,974 Cr in Q3FY25 to Rs 3,825 Cr in Q3FY26, while the QoQ fell by 18 percent from Rs 4,678 Cr in Q2FY26.
The company has a 3 year sales CAGR of 18 percent, while the TTM is at 12 percent. The company’s 3 year profit CAGR is at 23 percent, while the TTM number is at 23 percent. The company also has a ROCE of 14 percent and a ROE of 17 percent.
Middle East revenue contribution
As of the latest quarter, the Middle East contributes about 35 percent to the top line of the company and contributes to about 11 percent of the order inflow for Q3FY26, while 9MFY26 order inflow from the Middle East stood at 33 percent.
The company’s Middle Eastern footprint is strategically concentrated in Saudi Arabia, the UAE, Oman, and Qatar. While these nations maintain strong diplomatic and security ties with the United States, the regional landscape remains complex. Despite recent bombings in the area, the operational fallout has been remarkably contained thus far.
Will it affect the company financially?
Fortunately, only 5 percent of active projects are currently impacted by the unrest, primarily due to their proximity to specific conflict zones. Management remains vigilant, as sustained stability in these core markets is essential for maintaining the robust 33 percent order inflow momentum witnessed throughout the first nine months of the fiscal year.
The stability of the company’s top line remains heavily tethered to regional supply chains. A senior energy official warned that if logistical bottlenecks are not resolved within three months, revenue deferment could occur. This implies that while the order book is secure, actual income recognition is vulnerable to external geopolitical shocks.
Regarding the bottom line, leadership remains cautious about margin compression. While officials declined to provide specific impact figures, they expressed confidence in their cost pass-through strategy. By shifting rising inflationary and freight expenses onto customers, the company aims to shield its profit margins from being absorbed by these escalating operational pressures.
Could the war affect the Q4 FY26 result?
Q4FY26 performance of Larsen & Toubro could see some impact as the Middle East conflict continues, though management maintains that 95 percent of operations remain unaffected. While this offers optimism, uncertainty around supply chains and execution persists. Given its significant regional exposure and strong order book, the stock may stay volatile until the crisis stabilizes.
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