The conflict involving Iran, Israel and the United States continues to escalate, and this has led to a sharp spike in oil prices. Crude oil has shot up to 2022 highs well over the $115/bbl mark on concerns over prolonged disruptions to oil production and shipping and its impact on supply.
This is not at all good news for India, which is a key importer of oil. Nilesh Shah, MD Kotak Mahindra AMC pointed out that, “every 10 % jump in Oil prices adversely impacts our CPI inflation by 20 bps in primary effect, 10 bps in GDP Growth and 10 bps in Current Account Deficit on a back of envelope calculation.”
He added that, “If we take both primary and secondary effects the hit will almost double. This puts pressure on rupee, rates and equity markets.”
1. Every $10 rise may widen India’s CAD by 36 bps: SBI Research
SBI Research estimated that every $10 per barrel increase in oil prices could widen India’s current account deficit by 36 basis points in FY27.
Brent crude oil has risen sharply from $58.92 per barrel in December 2025 and has now crossed around $115.78 per barrel.
SBI Research warned that if the oil reaches $130, Indian economy will be significantly impacted. “As oil prices increase from $90 to $130 per bbl, the current account deficit widens, inflation rises, and GDP growth declines.”
2. Oil at $130 could drag India’s GDP growth to 6% in FY27: SBI Research
SBI research also estimated that an increase in oil prices could push inflation higher by 35–40 basis points and reduce economic growth by 20–25 basis points.
If crude prices climb further to around $130 per barrel, India’s GDP growth could fall to about 6%, assuming a base growth estimate of 7% for FY27.
3. Rupee slides below 92 against US dollar amid Middle East tension
Economists expect increasing crude oil prices to put pressure on the Rupee as well. Rupee has crossed the 92 mark against US dollar amid Middle East tension. Today, Indian Rupee plummets 43 paise to 92.25 against US dollar in early trade.
Brokerage firm JM Financial warned that the rupee may face near-term depreciation pressure, which could prompt intervention by the Reserve Bank of India.
India’s trade with GCC nations at risk
Along with oil price trade is also in focus amid hightening tension in the Middle East.
SBI research highlighted that the six member GCC countries including, Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman, Bahrain accounted for 13.06% of India’s total exports and 16.18% of its total imports during April–December FY26.
Other West Asian countries contributed 2.03% to India’s exports and 3.94% to imports during the same period.
SBI fresearch noted that a prolonged conflict in the region could disrupt trade flows between India and West Asia, particularly in key commodities such as crude oil, pearls and precious metals, inorganic chemicals, fertilizers and organic chemicals.
Conclusion
Crude is a major concern for the economy and the expectation that it could rise further is making analysts worried. According to a Reuters report, Qatar Energy Minister Saad al-Kaabi told the Financial Times in an interview published on Friday that all if the Iran conflict continues it will drives oil to $150 a barrel. Qatar halted its production of liquefied natural gas on Monday, as Iran continued to strike Gulf countries in retaliation for Israeli and US attacks.