War Could Push Oil Higher, But Markets Fear Rupee Volatility & FII De-Risking: Neelkanth Mishra

The escalating US-Israel vs Iran conflict could have significant implications for the global economy, and India may be particularly vulnerable due to its heavy dependence on imported energy. Speaking on the potential impact, Axis Bank Chief Economist Neelkanth Mishra explained that India imports nearly 50% of its dense energy needs, including oil, gas and fertiliser inputs, making the country highly sensitive to fluctuations in global oil prices. According to Mishra, every one-dollar rise in crude oil prices adds roughly $1.8 billion to India’s annual import bill, meaning a $50 surge could translate into an economic impact of nearly $90 billion, equivalent to more than 2% of India’s GDP if sustained for a year. However, Mishra also emphasised that the duration of the conflict will be the key factor. If tensions last only a few weeks, the economic impact on India may remain manageable due to buffers within the fuel pricing system and reserves accumulated by oil marketing companies. A prolonged conflict, however, could affect the balance of payments, inflation, the rupee, and investor sentiment, particularly as global markets begin rewarding oil-producing nations while penalising energy-importing economies like India. With geopolitical tensions rising in West Asia, markets are closely watching how long the conflict continues and how sharply oil prices react.