West Asia conflict: From oil to inflation, how did the crisis impact India?
India faced economic strain from the West Asia conflict due to surging oil prices, currency pressure, and inflation, with fuel costs rising sharply after four years of stability. The crisis highlighted India’s heavy reliance on West Asia for crude imports and remittances, disrupting trade and domestic energy markets.
The potential U.S.-Iran deal to end the West Asia conflict and reopen the Strait of Hormuz could ease global economic tensions after months of disruption, but India has already felt significant impacts. The crisis exposed the country’s dependence on West Asia for 90% of its crude oil imports, 61% of its LNG imports, and critical LPG supplies, all of which contributed to rising energy costs. Oil prices became the primary transmission channel for economic strain, with Brent crude surpassing $100 per barrel during peak conflict fears. This surge increased India’s import bill, worsened inflation, and strained state-run oil marketing companies (OMCs), which faced underrecovery losses of ₹30,000 crore per month. Despite initial resistance, fuel prices were adjusted multiple times in May 2026—petrol and diesel rose by ₹7.38 and ₹7.52 per litre, respectively, with non-branded petrol in Delhi reaching ₹102.12 per litre. The rupee also weakened under pressure, reflecting broader economic instability. Higher global energy costs further strained household budgets, leading to a ₹29 increase in domestic LPG cylinder prices by June 7. Trade disruptions and remittance declines from Gulf nations compounded the challenges, as India relies on West Asia for nearly 20% of global oil trade passing through the Strait of Hormuz. The conflict’s ripple effects extended to aviation and industrial sectors, with urea production—dependent on imported gas—facing cost escalations. While the proposed peace deal may stabilize markets, India’s economic recovery hinges on resolving energy price volatility and currency pressures.
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