Global crude oil prices have surged in recent days as the war in West Asia continues, raising concerns about the potential impact on major energy-importing economies such as India.
Brent crude futures, the global oil benchmark, were trading at about $85 per barrel around 1:22 pm, reflecting heightened volatility in energy markets.
However, it is important to note that prices have not yet breached the $100 per barrel mark, but analysts say continued disruptions to global oil flows could push crude closer to that level.
The risk largely centres on the Strait of Hormuz, one of the world’s most critical oil shipping routes.
According to analysis from S&P Global, about 20.8 million barrels per day of oil and petroleum products move through the narrow waterway, with more than 80% of those volumes heading to Asian markets.
At its narrowest point, the strait is only about 21 nautical miles wide, with shipping lanes roughly two miles wide each. The conflict has already begun to disrupt tanker movement through the corridor.
It is worth mentioning that shipping through the Strait of Hormuz has dropped sharply as the conflict escalates. Vessel-tracking data shows oil tanker traffic through the waterway has fallen by about 90% compared with normal levels, with some days seeing almost no tankers transit the strait as security risks and insurance concerns keep ships waiting outside the Gulf.
“The duration of the war is critical,” said Jim Burkhard, vice president and global head of crude oil research at S&P Global Energy.
“If the reduction in tanker traffic continues for a week or so, it will be historic. Beyond that, it would be epochal for the oil market with prices rising to ration scarce supply and impacts in financial markets.”
According to S&P Global analysis, as much as 15 million barrels per day of crude oil and petroleum products could be at risk if tanker flows through the strait remain disrupted.
Even a partial disruption could have major consequences for global oil markets. A supply shock of 7–8 million barrels per day would exceed the volumes initially affected when Russia invaded Ukraine or after Iraq’s invasion of Kuwait in 1990.
“While not certain, the risk is real,” Burkhard said.
“The potential impact on global oil supply and the world economy could be so significant that it is difficult to imagine a worst-case scenario—no tankers transiting the Strait of Hormuz—lasting more than a short while, but it could.”
HOW COSTLIER CRUDE IMPACTS INDIA’S ECONOMY
India imports more than 85% of its crude oil requirement, making the economy highly vulnerable to fluctuations in global oil markets.
Because crude oil is also the country’s largest import item, higher prices quickly translate into a larger import bill and pressure on the country’s external balance.
According to estimates by ICRA Limited, every $10 per barrel increase in crude prices could raise India’s oil import bill by about $13–14 billion and widen the current account deficit by roughly 0.3 percentage points of GDP.
If crude prices were to rise from around $85 to $100 per barrel, India’s annual oil import bill could increase by roughly $20–25 billion.
Research from DSP Mutual Fund also highlights how sensitive India’s economy is to oil prices. In its March 2026 Netra report, the fund house said that if crude prices were to climb to $120 per barrel, India’s oil trade deficit could rise to around $220 billion, potentially pushing the current account deficit above 3% of GDP.
Higher crude prices typically push up costs across the economy.
Even if retail petrol and diesel prices remain partly controlled, expensive oil increases transportation costs, raises logistics expenses and pushes up manufacturing input costs. These pressures eventually feed into broader inflation as businesses pass on higher costs to consumers.
That could complicate the policy outlook for the Reserve Bank of India, which targets inflation of around 4%.
Elevated prices can also weigh on the rupee.Since oil imports are paid for in dollars, rising crude prices increase the demand for foreign currency from Indian refiners and oil marketing companies.
This can put downward pressure on the rupee, especially if the country’s import bill rises sharply.
A weaker rupee in turn makes imports more expensive, adding to inflationary pressures in the economy.
INDIA HAS A WINDOW OF RELIEF
In a development that could offer short-term relief, the United States has granted India a 30-day window allowing refiners to purchase Russian oil cargoes already at sea.
The temporary license issued by the US Treasury allows transactions involving Russian crude that was loaded before March 5 and delivered to India by early April, helping keep supplies flowing into global markets amid the current disruptions.
The waiver gives Indian refiners additional flexibility to secure cargoes at a time when global oil flows face uncertainty due to the West Asia conflict.
For now, crude prices remain below levels that could significantly disrupt global markets.
V K Vijayakumar, chief investment strategist at Geojit Investments Limited, said crude has risen about 16% since the conflict escalated, but the increase is still smaller than spikes seen during some earlier geopolitical crises.
“So long as Brent crude moves around $85 levels, the market is unlikely to be impacted,” he said.
However, the situation could change quickly if prices climb further. “If Brent price spikes above $90 and moves towards $100, global markets will be impacted. Therefore, watch out for crude prices.”
