Crude oil prices crossing the $100 per barrel mark amid the escalating US–Iran conflict are raising fresh concerns for the Indian economy, with risks emerging around inflation, the current account deficit, and corporate profitability. On Tuesday, the Brent Crude futures traded between $90-93 per barrel on Tuesday after surging to nearly $120 in the previous day, as US President Donald Trump signaled that the war with Iran may be nearing its end and that the US military operation is progressing well ahead of its initial timetable. However, the uncertainty for the Indian economy and India Inc is far from over.India imports nearly 85% of its crude oil requirement, making the economy particularly vulnerable to global oil price shocks. Analysts say the immediate transmission channel will be through higher energy prices and currency volatility, both of which could increase costs for businesses and widen India’s import bill.
Garima Kapoor, Deputy Head of Research and Economist at Elara Capital, said sectors with high energy intensity are likely to feel the impact first. “At the corporate level, sectors with high energy intensity are most exposed. Oil marketing companies, aviation, cement, fertilisers and capital goods could face margin pressure as fuel and logistics costs rise,” Kapoor said.
Companies with significant import exposure may face additional pressure if the rupee weakens further. Firms with dollar-denominated debt or large import payables could see their costs increase sharply as currency depreciation compounds the rise in commodity prices.
According to Kapoor, however, the earnings impact on companies may remain cyclical rather than structural unless crude prices stay elevated for a prolonged period.
“Unless crude prices remain elevated for more than one quarter, the earnings impact is likely to remain cyclical rather than structural,” she said.
Data suggests the macroeconomic risks could intensify if oil prices remain elevated. According to an ICRA report, every $10 increase in crude oil prices could widen India’s current account deficit (CAD) by around 30–40 basis points. ICRA estimates that if crude prices average around $100–105 per barrel for financial year 2027, India’s CAD could widen to about 1.9–2.2% of GDP, significantly higher than the baseline projection of around 1%.
Higher oil prices could also feed into inflation, though the extent of the impact would depend on how much of the increase is passed on to consumers through fuel prices. The report noted that crude price shocks tend to affect wholesale inflation more strongly than retail inflation because fuel carries a larger weight in the wholesale price index.
Beyond macro indicators, elevated crude prices could also disrupt trade and supply chains if the conflict intensifies. The Strait of Hormuz, a key shipping route for global oil trade, remains a critical chokepoint. Disruptions in the region could increase freight costs and delay shipments.
ICRA warned that the conflict could affect India’s trade flows with West Asia, which accounts for around 14% of India’s exports and more than 20% of its imports.
Several sectors including airlines, fertilisers, textiles, tyres and shipping could see pressure on margins due to higher fuel and logistics costs if the situation escalates further.
India Inc must reassess energy hedging strategies
Economists say companies should start preparing for volatility rather than waiting for the crisis to deepen. Kapoor suggests firms reassess energy hedging strategies, secure currency protection for import exposures, and review supply chains that depend heavily on the Middle East region.
“Companies with significant fuel exposure (aviation, logistics, shipping, paints, chemicals) should immediately reassess hedge ratios and secure partial protection against a potential rise in crude prices,” Kapoor said. Meanwhile, firms with USD import payables should hedge at least 3–6 months of exposure using forward contracts, Kapoor added.
“While USD call options are currently expensive due to expectations of a stronger dollar, companies without any protection may still need limited option cover as insurance against sharp rupee depreciation,” Kapoor said.
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