Page 32 - The Indian EYE 032026

BUSINESS & TRADE MARCH 20, 2026 | The Indian Eye 32

War in Iran Sends Shockwaves Through Indian

Economy as Oil Surge and Market Volatility Mount

Rising crude prices, investor anxiety and growing fiscal pressures are beginning to weigh on India’s
economy as the conflict involving Iran threatens global energy supplies through the Strait of Hormuz

OUR BUREAU The longer the conflict continues,
the heavier the fiscal toll could be-
New Delhi
come. According to the same report,
ndia’s economy is beginning to each additional month of conflict
feel the weight of the escalating with crude prices hovering around
Iconflict involving Iran, as rising $100 per barrel could add roughly
oil prices, market volatility and fiscal `30,000 crore to the government’s
pressures ripple through the coun- fiscal cost, largely to cover losses
try’s financial system. With crude faced by oil marketing companies.
prices nearing the psychologically Financial market participants
critical mark of $100 per barrel and say the uncertainty surrounding the
tensions intensifying around the conflict has also fueled global risk
strategically vital Strait of Hormuz, aversion, prompting investors to re-
economists warn that the conflict treat from equities and move toward
could have significant consequences safer assets.
for India’s growth, fiscal balance and “Investor sentiment remained
currency stability if the crisis drags on. fragile, largely influenced by escalat-
The first signs of strain were vis- ing geopolitical tensions in the Mid-
ible in India’s financial markets this dle East and renewed concerns over
week. Benchmark indices ended maritime security following attacks
sharply lower on Thursday as geo- on Gulf shipping near the Strait of
political tensions unsettled inves- Hormuz,” said Ponmudi R, CEO of
tors. The Sensex closed at 76,034.42 Enrich Money.
points, down 829.29 points or 1.08 “These developments triggered a
per cent, while the Nifty ended at sharp rise in crude oil prices and in-
23,639.15 points, down 227.70 points creased global risk aversion, leading
or 0.95 per cent. investors to adopt a defensive stance
The sell-off followed reports that across financial markets,” he added.
the navy chief of Iran warned that The surge in crude prices has
vessels seeking to pass through the also reignited fears of inflation and
Strait of Hormuz would require Teh- energy supply disruptions across
ran’s approval or risk being targeted. Asia, including India.
The statement heightened fears of “Geopolitical tensions in the
disruptions to global energy supply Middle East continue to dampen
through one of the world’s most im- People arrive to collect gas cylinders at a gas agency in Jaipur on Thursday as the supply of global risk appetite, as fresh attacks
portant oil transit routes. LPG creates a crisis across the country (ANI) on oil-shipping vessels have pushed
For India, which imports more crude prices closer to USD 100 per
than 80 percent of its crude oil re- DII buying is not helping the market count deficit could widen to around barrel, intensifying concerns over
quirements, such disruptions could to recover since FIIs are sustained 2 percent of GDP, compared with inflation and gas supply constraints,”
prove costly. sellers and show no signs of reversing roughly 1 percent when oil prices av- said Vinod Nair, Head of Research
“External headwinds have their strategy in this uncertain global erage $70 per barrel. at Geojit Investments Limited.
pushed the market into a weak zone,” environment,” Vijayakumar said. At the same time, the Indian He noted that the market is
said V K Vijayakumar, Chief Invest- The war’s economic effects ex- rupee could weaken sharply. The witnessing broad-based consolida-
ment Strategist at Geojit Investments tend well beyond the stock market. report projects the USD–INR ex- tion, although selective buying has
Limited. “With the war continuing Analysts say India faces a complex change rate could slide to between emerged in sectors such as renew-
to rage with no signs of let-up and mix of risks—from rising import bills 94 and 95 in such a scenario. able energy and utilities, which in-
Brent crude again bouncing back to and inflationary pressures to fiscal More critically, the fiscal burden vestors increasingly see as strategic
higher levels, the weakness is likely strain and currency volatility. on the government could rise dra- hedges against fossil fuel volatility.
to persist.” According to a report by Elara matically. Economists warn that the im-
He added that although domes- Securities, sustained crude oil prices “In a scenario where Brent crude pact could eventually spill over into
tic institutional investors have been above $100 per barrel could signifi- sustains at $100 per barrel through the wider domestic economy. Higher
buying into the market, their pur- cantly alter India’s economic outlook FY27E, India’s current account defi- fuel costs typically feed into trans-
chases have not been enough to off- in the coming years. The brokerage cit could widen to 2 per cent of GDP… portation, manufacturing and food
set the selling pressure from foreign estimates that if Brent crude remains while the Centre’s annual additional prices, raising inflationary pressures
investors. “Even though DIIs are around that level through the fiscal expenditure would rise by INR 3.6 and potentially forcing policymakers
continuously buying in the market, year 2027, the country’s current ac- trillion annually,” the report said. to take difficult decisions.

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