Crude oil prices have surged past $115 a barrel as tensions involving Iran, Israel and the United States escalate, raising fresh concerns for oil-importing economies such as India. Fears of prolonged disruption to oil production and shipping routes in the Middle East have pushed crude to its highest levels since 2022.
India depends heavily on imported energy and a sustained spike in crude prices could widen the current account deficit, push inflation higher, weaken the rupee and slow economic growth.
Analysts say every 10 percent rise in oil prices can have a measurable impact on the economy. “Every 10 percent jump in oil prices adversely impacts CPI inflation by about 20 basis points in the primary effect, GDP growth by 10 basis points and the current account deficit by around 10 basis points,” one analyst said. Including secondary effects, the impact could be almost double, putting pressure on the rupee, interest rates and equity markets.
According to a report by State Bank of India’s research team, every $10 per barrel rise in crude prices could widen India’s current account deficit by around 36 basis points in FY27.
Brent crude has climbed sharply from about $58.92 per barrel in December 2025 to above $115 now. If prices continue to rise, the pressure on India’s external balances could intensify.
SBI Research warned that if crude climbs to $130 a barrel, the macroeconomic impact could be significant, with a wider current account deficit, higher inflation and slower economic growth.
The report estimates that higher oil prices could push inflation up by around 35–40 basis points while reducing economic growth by 20–25 basis points.
If crude prices rise to about $130 per barrel, India’s GDP growth could slow to around 6 percent in FY27, compared with a baseline growth estimate of about 7 percent.
Rising crude prices are also weighing on the rupee. The Indian currency has slipped past the 92 mark against the US dollar amid the escalating West Asia tensions.
In early trade on Monday, the rupee weakened by 43 paise to about 92.25 against the dollar.
Brokerage JM Financial warned that the rupee may face further near-term depreciation pressure, which could trigger intervention by the Reserve Bank of India to stabilise the currency.
Apart from oil, trade flows could also be affected if tensions in West Asia persist.
SBI Research noted that the six-member Gulf Cooperation Council — comprising Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain — accounted for 13.06 percent of India’s exports and 16.18 percent of imports during April–December FY26.
Other West Asian countries contributed 2.03 percent to India’s exports and 3.94 percent to imports during the same period.
A prolonged conflict could disrupt trade in key commodities including crude oil, pearls and precious metals, inorganic chemicals, fertilisers and organic chemicals.
Energy markets remain on edge as the geopolitical situation evolves. Saad al-Kaabi, energy minister of Qatar, told the Financial Times that if the conflict escalates further, oil prices could potentially surge to as high as $150 a barrel.
With energy markets already volatile, analysts warn that any disruption to production or shipping in the Gulf region could quickly push prices even higher, adding fresh pressure on India’s inflation, currency and growth outlook.
