India’s oil economy is under mounting strain as a blistering surge in crude prices – triggered by the Gulf conflict – squeezes refiners, threatens fiscal calculations and raises fresh concerns over growth and inflation, Times of India reported.
The cost of crude for Indian refiners has jumped a staggering 93 per cent since February 28, when the conflict erupted, hitting $136.56 a barrel on Friday. The spike is eating into margins for domestic giants including Indian Oil Corporation, Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and Reliance Industries.
Globally, many countries – including the United States – have allowed retail fuel prices to rise in line with crude. In India, however, pump prices have remained unchanged so far, forcing state-run oil companies to absorb the shock after months of gains.
Any relief appears unlikely in the near term. With the fiscal year closing on March 31, the government is expected to hold the line on prices to protect tax revenues and maintain its budget arithmetic. Elections due in four states and the Union Territory of Puducherry further complicate the calculus, with any political green light on price hikes unlikely before the final phase of voting on April 29.
Meanwhile, fuel prices in the US were estimated at $3.7 a gallon on Monday, according to AAA data. Since the war began, benchmark Brent crude has surged over 40 per cent, while Russia’s Urals crude has climbed by more than 50 per cent.
India’s own crude basket – a mix of sour grades from Oman and Dubai along with sweet Brent – tells a similar story. It rose from $70.9 a barrel on Feb. 26 to $127.2 on March 12, before jumping another $9.3, or 7.3 per cent, to $136.5 on Friday, according to official data.
For months, India had been cushioned by discounted Russian oil purchases. That advantage is now fading as global supply tightens. The disruption stems largely from Iran’s blockade of the Strait of Hormuz, a chokepoint that carries about 20 per cent of global oil and gas supply. For India, the exposure is even sharper, with roughly 60 per cent of its energy flows passing through the narrow channel.
With tanker movements disrupted, volatility is expected to persist. Brent crude briefly rallied to a three-year high of $120 a barrel on March 9 before easing after members of the International Energy Agency agreed to release 400 million barrels from emergency reserves to cool markets.
Still, the risks to India’s external balance are mounting. Neelkanth Mishra, chief economist at Axis Bank and a member of the Prime Minister’s Economic Advisory Council, warned that sustained high prices could significantly widen the trade gap. If crude averages $100 a barrel for a year, India’s import bill could swell sharply, hurting the trade balance by about $80 billion, or 2.1 per cent of GDP.
Ratings agency ICRA flagged broader risks, cautioning that a prolonged conflict could disrupt energy supplies and shipping routes, with ripple effects across multiple sectors and the wider macroeconomic outlook. It estimates that every $10 increase in average crude prices could widen India’s current account deficit by 30-40 basis points.
The impact is not confined to India. Gita Gopinath, professor of economics at Harvard University, warned that higher crude prices could drag on global growth. “If we are now looking at an average of $85 a barrel for 2026, then that could shave off around 0.3-0.4pp from global growth. Headline inflation could rise by 60 bps,” she posted on X on Sunday.
For now, India’s strategy of shielding consumers from price shocks is buying time. But with crude surging and supply routes under strain, the pressure is building – on company balance sheets, on government finances, and ultimately, on the broader economy.
