MUMBAI: Larsen & Toubro Ltd (L&T) shares plunged as much as 7% in intraday trade, currently trading 5% lower at ₹4,066.45, as escalating conflict in the Middle East raised concerns over the company's substantial exposure to the region [citation:1][citation:8]. With an international order book of ₹3.6 lakh crore and approximately 75-80% of that coming from the Middle East, investors fear project delays, cost overruns, and potential disruptions [citation:2][citation:5].
Larsen & Toubro Ltd
L&T shares hit an intraday low of ₹3,960, down 7.4% from Friday's close, following coordinated military strikes by the United States and Israel on Iran that killed Iran's Supreme Leader Ali Khamenei on February 28 [citation:5][citation:9]. Iran has retaliated by attacking US naval bases in Bahrain, UAE and Kuwait, leading to airspace closures and widespread disruption [citation:2][citation:3].
Exposure Details: As of December 2025, L&T's consolidated international order book stood at approximately ₹3.6 lakh crore, accounting for about 49% of its total order book [citation:3][citation:5]. Of this, around 75-80% comes from the Middle East, with Saudi Arabia and UAE representing the bulk of the regional portfolio [citation:3][citation:5]. The Middle East accounts for 37% of L&T's total order book and 33% of order inflows in the first nine months of FY26 [citation:2][citation:3].
Conflict escalation: key risks
On Saturday morning, February 28, Israel and the United States launched attacks on Iran, killing Supreme Leader Ali Khamenei. Iran has responded by targeting US naval bases in Bahrain, UAE and Kuwait, warning that "there were no red lines now and everything is possible" [citation:3][citation:9]. Since then, Iran has launched a barrage of attacks across the Middle East and into Israel, resulting in airspace closures, stranded travelers, and significant business disruption [citation:3]. For L&T, the primary concerns are:
- Execution delays: Potential force majeure clauses being invoked on major projects.
- Cost overruns: Higher insurance premiums, alternative logistics routes, supply chain inflation.
- Labour shortages: Travel advisories issued to avoid non-essential movement [citation:2].
- Competition intensity: If UAE real estate slows, Chinese competitors may intensify pricing pressure [citation:9].
L&T's Middle East footprint
As of Q3 FY26, L&T's consolidated order book stood at approximately ₹7.33 lakh crore. International orders constitute 49% (~₹3.6 lakh crore), with the Middle East representing about 75% of international orders — implying a Middle East order book of roughly ₹1.2 lakh crore [citation:2][citation:5][citation:9]. Key projects include:
- UAE: Multi-billion dollar gas processing expansion with ADNOC.
- Saudi Arabia: NEOM-related utilities, desalination plants, and power transmission.
- Qatar: North Field expansion (LNG facilities).
- Kuwait/Oman: Power transmission and substation projects.
L&T's most recent order win, valued at up to ₹10,000 crore, spans projects in the Middle East and India for power transmission infrastructure [citation:1][citation:2].
- Share drop: 7.4% intraday low of ₹3,960 — sharpest fall in 11 months [citation:5]
- Current price: ₹4,066.45 (-5% from previous close ₹4,278.30) [citation:1][citation:8]
- ME order book: ₹1.2 lakh crore at risk of delay/review [citation:2][citation:5]
- International exposure: 49% of total order book from overseas; 75% of that from Middle East [citation:3]
- Market impact: Sensex down 1,572 pts (1.93%), Nifty below 24,700 [citation:10]
- Company response: All employees safe, real-time monitoring, travel advisory issued [citation:2]
Financial impact: what analysts are saying
Execution risks in focus
Domestic brokerage firm JM Financial noted that L&T could face execution disruptions in its Middle East projects, while a potential slowdown in the UAE real estate market may intensify competition from Chinese players [citation:9]. The closure of sea lanes and related supply chain disruptions could adversely impact project timelines and costs [citation:9].
Guidance maintained for now
Following its Q3 earnings, L&T's management maintained its full-year guidance: order inflow growth of 10%, revenue growth of 15%, and core margin guidance of 8% for FY26 [citation:2][citation:3]. However, analysts suggest these targets may face headwinds if the conflict persists.
Balance sheet strength
L&T maintains strong liquidity with cash equivalents of approximately ₹18,000 crore and low net debt-to-equity of 0.35x, providing cushion against short-term working capital shocks. However, if clients delay milestone payments due to force majeure, cash conversion could be impacted.
L&T Middle East Order Book (estimated as of Dec 2025)
| Segment | ₹ Cr | % of ME total | Key geography |
|---|---|---|---|
| Hydrocarbon (L&T Energy) | 69,600 | 58% | UAE, Saudi Arabia |
| Infrastructure | 26,400 | 22% | Qatar, Kuwait |
| Power & Transmission | 14,400 | 12% | Oman, UAE |
| Heavy Engineering / Exports | 9,600 | 8% | Regional |
| Total Middle East | 1,20,000 | 100% | - |
Market reaction & brokerages
Most brokerages have turned cautious post the conflict escalation. JM Financial highlighted risks of execution disruptions and potential slowdown in UAE real estate increasing competition [citation:9]. ICICI Securities maintains L&T as top pick from capital goods sector, noting strong backlog and margin trends, but acknowledges near-term uncertainty from the war [citation:5]. Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, advises: "Experience tells us that panic selling during a crisis is wrong strategy. Investors should refrain from selling and watch how things evolve. Weakness in the market can be used to slowly accumulate high quality stocks in domestic consumption themes" [citation:5].
Key takeaways for investors
- ₹1.2 lakh crore exposure: 37% of total order book lies in conflict-prone Middle East region; primarily hydrocarbon [citation:2][citation:9].
- Short-term pain: Stock could remain volatile until geopolitical clarity emerges; support near ₹3,960 level tested today.
- Company response proactive: Real-time monitoring, employee safety confirmed, travel advisories issued [citation:2].
- No guidance cut yet: Management maintains FY26 guidance of 15% revenue growth, 8% margins [citation:2][citation:3].
- Domestic pipeline strong: Robust domestic capex, private sector investments, defence, green energy continue to provide cushion [citation:5].
- Historical resilience: Past crises (Covid, Russia-Ukraine, Gaza) show markets recover within 6 months; corrections may offer entry points [citation:5].
Outlook & monitorables
The next few weeks will be critical. Investors should track: (1) Any force majeure declarations by L&T or its clients, (2) Q4 order inflow commentary (expected in April), (3) movement in shipping & insurance costs, (4) crude oil price trajectory (Brent spiked toward $80), and (5) diplomatic efforts to de-escalate the conflict [citation:10]. L&T's stock has historically recovered strongly from geopolitical shocks, and with domestic capex cycle strengthening, any deep correction may attract long-term institutional interest.
L&T's Q3 FY26 performance: Revenue from operations stood at ₹71,450 crore, up 10% YoY. Consolidated net profit declined 4.3% to ₹3,215 crore, impacted by a one-time provision of ₹1,191 crore towards employee benefits under new labour codes [citation:9].
Disclaimer: The analysis and broker views are for information only. Please consult your advisor before taking positions.