New Delhi | 12 March 2026

Growing tensions linked to the conflict involving the United States and Iran have pushed global crude oil prices higher, raising concerns about the possible impact on India’s economy. Experts warn that if crude oil prices remain close to $100 per barrel for nearly a year, the country may experience slower economic growth and rising inflation. Since India depends heavily on imported energy, any long-term increase in oil prices could place additional pressure on government finances and the overall economy.

India imports nearly 90 percent of its crude oil and around 50 percent of its natural gas needs, making it particularly vulnerable to global supply disruptions. A significant portion of these imports comes from the Middle East, where export flows have already been affected by the ongoing conflict. Reports suggest that India’s current oil reserves can cover only about 20 to 25 days of consumption, which increases concerns about supply stability if the crisis continues for a longer period.

Economists say the most immediate impact could be seen in the country’s current account deficit. According to estimates , if oil prices average around $100 per barrel, India’s current account deficit could widen to between 1.9 percent and 2.2 percent of GDP in the 2026–27 financial year, compared to the projected 0.7 percent to 0.8 percent. The pressure has already affected the Indian currency, with the rupee touching record lows and prompting the Reserve Bank of India to intervene by selling dollars from its reserves to stabilize the market.

Higher oil prices could also increase the government’s financial burden. Analysts at Elara Securities estimate that government expenditure could rise by nearly 3.6 trillion rupees in the next financial year if crude prices remain around $100 per barrel. One of the major costs would be increased fertiliser subsidies to support farmers. In addition, the government may have to compensate oil marketing companies if fuel prices are kept stable for consumers despite rising global costs.

Economic growth and inflation could also be affected if the situation continues. A report by the research department of State Bank of India suggests that if crude oil prices stay near $100 per barrel throughout the next financial year, India’s GDP growth could slow to around 6.6 percent while inflation could rise to about 4.1 percent. If prices rise further to around $130 per barrel, growth could drop closer to 6 percent. These projections come at a time when India’s economy has been described as being in a stable “Goldilocks” phase by Sanjay Malhotra, where growth remains strong while inflation stays relatively controlled.

 Rising Oil Prices Could Slow India’s Growth and Push Inflation Higher

Rising global oil prices amid the conflict involving the United States and Iran could put pressure on India’s economy if the situation continues for a long period. Economists warn that if crude oil prices remain around $100 per barrel for nearly a year, the country may face slower economic growth along with rising inflation. Since India depends heavily on imported energy, higher prices could increase the cost of imports and strain government finances.

India imports nearly 90 percent of its crude oil and about half of its natural gas needs, making it vulnerable to global supply disruptions. Much of this energy supply comes from the Middle East, where exports have been affected by the ongoing conflict. Reports suggest that the country’s existing oil reserves can cover only around 20 to 25 days of consumption, increasing concerns about supply security.

Analysts say the immediate impact could be seen in India’s current account deficit. According to estimates , if oil prices average around $100 per barrel, the deficit could widen to about 1.9–2.2 percent of GDP in the 2026–27 financial year. The pressure has also pushed the rupee lower, prompting the Reserve Bank of India to intervene in currency markets.

Higher oil prices could also increase government spending. Experts at Elara Securities estimate that government expenditure may rise significantly due to higher subsidies and fuel costs. A report by State Bank of India also suggests that if oil prices remain high, India’s GDP growth could slow to around 6.6 percent while inflation may rise in the coming financial year.