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The ongoing conflict in West Asia can have many effects on India’s economy. According to a new report by SBI Research, in the event of increasing geopolitical tensions, there is a possibility of a surge in crude oil prices, disruption in energy supply routes, impact on trade and remittances coming from Gulf countries.
What if the stress continues for a long time?
The report said that at present the immediate impact on inflation may be limited, but if tensions continue for a long time and supply chains are disrupted, global economic stability may be affected.
What is the crisis regarding oil supply?
- The biggest concern for India is regarding the supply of crude oil. India is dependent on imports for about 90 percent of its oil needs.
- Of the total 5.5 million barrels per day of imports, about 2 million barrels per day of oil comes through the Strait of Hormuz.
- If traffic on this important route is disrupted, India may face a risk of supply crisis and increase in import costs.
- In fact, about 20 percent of the world’s total crude oil passes through this narrow waterway, making it an important center of global energy supply.
How is the impact visible on global markets?
The effect of tension is also visible in global markets. The price of Brent crude has increased from around $58.92 per barrel in December 2025 and $70.75 per barrel at the end of February 2026 to around $85.40 per barrel in early March and even crossed $89 per barrel as geopolitical risks increased.
What is the possibility regarding inflation?
According to the report, for every $10 per barrel increase in crude oil prices, India’s current account deficit (CAD) can increase by about 36 basis points. Also, due to increase in cost based inflation, the Consumer Price Index (CPI) inflation rate may also increase by about 35-40 basis points.
What can happen due to increase in oil prices?
The continued rise in oil prices may also impact economic growth. It is estimated that every $10 per barrel increase could reduce India’s GDP growth rate by about 20-25 basis points. If prices reach $130 per barrel, India’s GDP growth rate in FY 2027 may be limited to around 6 percent instead of the estimated 7 percent. The report also highlights the risk of remittances coming from Gulf countries. India received personal remittances of about $138 billion in FY2025, up from $119 billion in FY2024. About 38 percent of these funds come from the Gulf Cooperation Council (GCC) countries, so the economic situation in the region can have a direct impact on this.
Trade with West Asia may be affected
Apart from this, India’s trade with West Asia may also be affected. GCC countries account for more than 13 percent of India’s total exports and 16 percent of its imports. Whereas other West Asian countries have about 2 percent share in exports and about 4 percent share in imports. The report also said that Indian banks and private companies also have investments and business in the region, which could increase financial risks in case of increased tensions. However, according to the report, India has taken several steps to reduce the risks to energy supply. The country is now importing crude oil from more than 40 countries and after 2022, imports from Russia have also increased. Also, steps like intervention in the foreign exchange market and open market operations by the Reserve Bank of India (RBI) have helped in controlling the fluctuations in the rupee and maintaining stability in the financial markets.