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Iran Tensions: India Faces Crude Oil Shock
24 Feb
Summary
- Crude oil prices may exceed $90 if US attacks Iran.
- India's import bill rises by $1 billion per $1 crude increase.
- Sectors like chemicals, paints, and aviation face impact.
The escalating conflict in West Asia poses a significant economic threat to India, primarily through the potential for soaring crude oil prices. Analysts anticipate that a US attack on Iran could push Brent crude prices above $90 a barrel, a sharp increase from current levels hovering around $72. Such a spike would directly inflate India's annual oil import bill by approximately $1 billion for every $1 increase in crude prices. India imports about 85% of its oil, having spent $161 billion in FY2025.
While India has ceased direct oil imports from Iran due to US sanctions, a global price surge will still strain its finances and widen its fiscal deficit. This situation is compounded by a noticeable drop in oil imports from Russia, previously a discounted source, under mounting US pressure. Russia was India's largest oil exporter in FY25, but imports have fallen 14% year-on-year in the first half of FY26.
