The world’s energy map is being redrawn in real time, and the ink is oil and blood.
As the conflict between the US-Israel alliance and Iran escalates from targeted strikes to a broader confrontation in the Gulf, fears of a major disruption to global oil supplies are rising. For the first time since the 2008 financial crisis, ‘$200 oil’ has shifted from fringe speculation to boardroom conversations from New York to New Delhi.
The worry centres on the Strait of Hormuz, a narrow passage handling almost a fifth of global oil shipments. Any extended disruption could spark a severe supply shock and push prices sharply higher. For India, one of the world’s top oil importers, the risks are particularly acute.
Why are fears of $200 oil rising?
Tensions escalated after US President Donald Trump ordered strikes on Iranian military targets on Kharg Island, the terminal handling most of Iran’s oil exports. While Washington says key oil infrastructure is largely intact, the move has stoked supply disruption fears. Iran has warned that continued instability could push crude sharply higher, even toward $200 a barrel if the conflict intensifies.
Consultancy Wood Mackenzie estimates a prolonged disruption of the Strait of Hormuz can create a supply gap of about 15 million barrels per day, roughly 15% of global demand, potentially pushing prices into the $150-$200 range. Goldman Sachs says a Hormuz blockade could have a much larger impact than the peak supply disruptions seen during the Russia-Ukraine war.
A Nuvama Wealth report warned that prices may rise to $110-$150/barrel within four to eight weeks. Former IMF chief economist Olivier Blanchard also cautioned that oil could approach $200 if shipping through the Strait becomes difficult to protect, even with naval escorts.
Why India is vulnerable
India imports nearly 90% of its crude requirements, with a large share from the Middle East, leaving the country highly exposed to supply shocks. Strategic reserves, including refinery inventories, cover roughly 70-75 days of consumption, offering little cushion if disruptions persist.
A sustained rise in oil prices would ripple through the economy.
“Historically, brent has spiked sharply during major supply shocks, most notably in 2008 when prices touched around $147/barrel during the global commodity boom,” said Ponmudi R, CEO, Enrich Money. “For India, a sharp rise in oil prices would widen the current account deficit (CAD), weaken the rupee, and increase inflationary pressures.”
Since crude is bought in dollars, higher prices inflate the import bill, widen the CAD, and pressure the rupee. Rising fuel costs also feed into inflation, with every 10% increase adding roughly 40-50 basis points. Analysts warn that crude at even $130 per barrel could slow GDP growth, while a prolonged spike toward $200 would hit consumption and business costs even harder.
Govt’s policy dilemma
Policymakers face a tough choice: Allow fuel prices to rise, risking higher inflation and political backlash, or cushion the shock through tax cuts or subsidies, straining public finances. A prolonged spike could also force the government to divert spending away from infrastructure projects to manage the higher energy bill.
Markets are already reacting
Stock markets are pricing in the risks. The benchmark Nifty has dropped nearly 8% in March 2026 so far, marking its second-steepest monthly decline in the past decade (after March 2020, when it plunged 23%). The BSE Sensex has lost nearly 4,000 points in a week.
State-run oil marketing companies (OMCs) have been hit particularly hard. Hindustan Petroleum, Indian Oil, and BPCL have declined sharply, with the sector losing about 20% since the conflict escalated. HSBC downgraded all three to “hold” from “buy,” citing margin risks. Citi Research cut its year-end Nifty targto 27,000 from 28,500 earlier, warning of risks to growth and earnings from rising oil prices and supply disruptions.
Several sectors are sensitive to crude prices
1) Paint: Companies such as Asian and Berger Paints face margin pressure as crude-linked inputs form a big part of their raw material costs.
2) Aviation: Jet fuel makes up as much as 40% of operating expenses for carriers like IndiGo and SpiceJet, hitting airlines hard.
3) Auto: Rising fuel costs could slow vehicle sales, with higher manufacturing expenses and weaker demand weighing on the sector.
4) Fertilisers: Prices of urea, ammonia, and phosphates could rise, adding to food inflation risks.
“A spike in crude to $200 per barrel is a low-probability scenario and not the base case,” said Jigar Trivedi, senior research analyst at IndusInd Securities. “However, such a price spike could accelerate India’s push toward renewables, EV adoption, and energy diversification, reducing long-term dependence on imported oil.”
Gas could be the next big risk
Beyond oil, analysts are warning of natural gas disruptions. Citi highlighted risks after Qatar halted LNG production, which supplies 40-50% of India’s imports. Petronet LNG, GAIL India, and Gujarat Gas could face supply and price volatility. Short-term disruptions could push LNG prices to $14-18 per mmBtu, while a prolonged three-month halt could lift prices toward $30 per mmBtu.
Fragile Outlook
“Globally, a surge toward $200/barrel cannot be ruled out. Such a rise could delay central banks’ rate cuts as energy-driven inflation returns. But for prices to stay that high, the market would need a prolonged supply disruption. Only geopolitical tensions aren’t enough, thanks to strategic reserves, OPEC spare capacity, and demand adjustments,” said Jateen Trivedi, VP Research Analyst-Commodity and Currency, LKP Securities.
Much now depends on whether tanker traffic through the Strait of Hormuz continues uninterrupted. If the corridor stays open, the global economy may avoid the worst-case scenario. But a prolonged disruption could trigger the biggest oil shock since 2008, posing a serious threat to India’s growth and macroeconomic stability.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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