The Israel–Iran war has entered Day 5,- One of the biggest worry for businesses across the world is the supply diruption and transit concerns through the the Strait of Hormuz, the world’s most critical oil chokepoint. In the latest update, Iran’s Islamic Revolutionary Guard Corps (IRGC) has claimed that it controls the Strait of Hormuz and warned that any vessels seeking to pass through the waterway risk damage from missiles or stray drones.
“Currently, the Strait of Hormuz is under the complete control of the Islamic Republic’s Navy,” Guards Navy official Mohammad Akbarzadeh said in a statement issued by Fars News Agency. This has led to a sharp surge in crude price and safe haven assets like gold is also clocking steady gains. The big question is how will it impact the Indian economy.
Crude near $84/bbl: Concerns about India’s fiscal health
The continued tensions and the disruption of the Strait of Hormuz have pushed crude prices near $84 per barrel. IDFC First Bank highlighted in its report that if crude prices remained high for a sustained period, it could impact India’s current account deficit and fiscal position, and also put pressure on the rupee.
The report noted that if crude prices remained high for a sustained period, it could create fiscal risks through higher LPG and fertiliser subsidies and lower dividends from oil public sector undertakings.
The report by IDFC First Bank also expects geopolitical tensions to trigger risk-off sentiment, putting pressure on the rupee. It noted that higher crude prices may widen the CAD and lead to foreign portfolio investor outflows.
Increase in Crude prices will impact India’s growth as well. As per the RBI’s sensitivity analysis, a 10% rise in crude oil prices can reduce real GDP growth by 15 basis points.
IDFC First Bank doesn’t expect the increase in crude prices to inflate retail petrol and diesel prices. It noted that retail petrol and diesel prices have remained largely stable in recent years, and oil marketing companies are likely to absorb any fluctuations in global crude prices.
Supply disruption likely temporary; OPEC+ output hike offers cushion
IDFC First Bank expects the disruption, if temporary, to be manageable by India. It also noted that OPEC+ has already announced a pre-emptive increase in output to stabilise markets.
Just to let our readers understand, latest reports on Reuters and PTI indicated that India holds sufficient crude inventories to meet demand for nearly 25 days. The news agencies quoted government sources and highlighted refiners also hold 25-day inventory of gas oil, gasoline and liquefied petroleum gas.
The report adds that India can also temporarily increase crude imports from Russia if required. In January 2026, Russia accounted for 19% of India’s crude imports, down from 36% in January 2025 after US imposed 25% additional tariff on India as a punishment for purchasing Russian oil.