A sharp escalation in the Iran–US conflict and the resulting surge in crude oil prices are beginning to ripple through India’s macro outlook, prompting global investment bank Goldman Sachs to turn more cautious on growth, inflation and interest rates.
Goldman Sachs has slashed India’s GDP growth forecast for 2025-26 to 5.9 percent, down from its earlier estimate of 7 percent before tensions flared in West Asia. This marks the second downgrade in quick succession, after a cut to 6.5 percent on March 13.
The revision reflects a reassessment of oil price assumptions and the expected duration of supply disruptions, particularly through the critical Strait of Hormuz. As a major energy importer, India remains highly vulnerable to sustained spikes in crude prices.
The brokerage expects Brent crude to remain elevated in the coming weeks:
Average of about $105 per barrel in March
Rising further to around $115 in April
Easing to about $80 by the fourth quarter
Prices had briefly surged to $119 per barrel amid fears of supply disruptions, and are currently hovering just above $102.
Goldman believes restricted flows through Hormuz could persist until mid-April before gradually normalising over the following month.
Alongside weaker growth, inflation risks are building. Goldman Sachs has raised its 2026 inflation forecast for India to 4.6 percent, up from 3.9 percent earlier.
While still within the 2–6 percent tolerance band of the Reserve Bank of India, the firm now sees a growing possibility of monetary tightening:
A potential 50 basis point hike in the repo rate
Pressure driven by rising fuel costs and currency weakness
The RBI is scheduled to meet for its bi-monthly policy review from April 6–8, its first meeting since the escalation of the conflict.
The Indian rupee has come under renewed pressure, weakening about 4 percent against the US dollar so far in 2026, after a 4.7 percent decline last year.
A softer currency could amplify imported inflation through higher fuel and input costs, increasing the burden on consumers and businesses.
Goldman Sachs also flagged external sector risks, projecting India’s current account deficit could widen to around 2 percent of GDP in 2026, compared with 1.3 percent in the October–December 2025 quarter. Higher oil import bills and currency depreciation are expected to drive this deterioration.
The latest assessment underscores how quickly geopolitical shocks—especially those affecting energy markets—can alter India’s economic trajectory, complicating the policy balance between supporting growth and containing inflation.