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    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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