21/04/2026
The escalation in the Middle East — marked by coordinated U.S.–Israeli strikes on Iran and retaliatory missile and drone attacks — has triggered a sharp surge in global commodity prices. Brent crude has jumped 7–13% to above $82 per barrel amid fears of disruptions in the Strait of Hormuz, while natural gas benchmarks in Europe and Asia have surged 25–70%. Gold has risen 2–5% as investors move toward safe-haven assets.
For India, the world’s third-largest oil importer, the shock carries immediate macroeconomic implications. The country imports nearly 85% of its crude requirements, and about one-fifth of global oil and LNG supplies pass through the Strait of Hormuz. Any prolonged disruption could significantly raise India’s import bill, widen the current account deficit (CAD), push inflation higher, and weaken the rupee.
Estimates suggest that every sustained $10 increase in crude widens India’s CAD by roughly 0.4–0.5% of GDP, adds 20–35 basis points to CPI inflation, and trims GDP growth by around 15–25 basis points. If crude sustains above $90–95 per barrel — considered the macroeconomic “stress zone” — corporate earnings and financial stability could face deeper pressure.
Crude Oil: The Core Transmission Channel
Crude oil remains the dominant driver of economic impact. India consumes about 5 million barrels per day, and each $1 rise in crude prices adds roughly ₹16,000 crore to the annual import bill.
The aviation sector faces immediate pressure as aviation turbine fuel (ATF) accounts for 30–45% of airline costs, potentially cutting EBITDA margins by 5–15%. Logistics and transport firms face rising diesel and petrol prices, pushing freight costs up 10–20%. Paints and chemical manufacturers face higher petrochemical feedstock costs such as naphtha, raising inputs by 10–15%.
FMCG companies also face pressure because oil-based derivatives account for about a quarter of packaging and raw material costs. Tyre manufacturers and auto ancillaries confront higher synthetic rubber and feedstock prices, while demand may soften due to rising fuel prices. Upstream producers such as ONGC and Oil India benefit from higher realizations, though downstream refiners may face margin compression if retail price adjustments lag.
Natural Gas, Agriculture and Metals
Global LNG markets have tightened as supply risks rise in the Gulf. India, expected to import 25–29 million tonnes of LNG annually by 2026, faces higher gas costs. City gas distributors may see feedstock costs rise 10–20%, while fertiliser manufacturers — where gas accounts for 70–80% of production costs — may require higher subsidies or delayed pass-throughs.
Higher fuel and freight costs also affect agriculture and food processing. Fertiliser and edible-oil logistics costs are rising, while exports of pulses, onions, and rice to Iran may face delays or cancellations.
Industrial metals are also impacted. Aluminium premiums have surged, raising input costs 5–10% for sectors such as cables, construction, and automobiles. Copper remains dominant in electrical wiring and power infrastructure, while aluminium is increasingly used in transmission conductors and vehicle lightweighting. Electric vehicles require far more copper — about 80 kg per vehicle compared with roughly 20 kg in internal combustion engines — while zinc remains critical for galvanising and corrosion protection.
Broader Macro Risks
Higher fuel prices could eventually lift petrol and diesel prices by ₹2–5 per litre, increasing transport and household costs. India’s strategic petroleum reserves cover only about two weeks of imports, underscoring vulnerability to supply shocks, though diversified crude sourcing and strong forex reserves offer partial buffers.
If the conflict persists and crude approaches $100 per barrel, India’s current economic “sweet spot” of strong growth and moderate inflation could face a significant test.