Indian crude oil basket hits $146.09 per barrel: How it will impact India

Indian crude oil basket, a derived mix of sour grades (Oman and Dubai average) and sweet grade (Brent dated) processed in Indian refineries, rose to $146.09 per barrel, according to the latest data from the Petroleum Planning and Analysis Cell.

With this, Indian crude oil basket averaged at $111.39 per barrel in March, 61.4 per cent higher than February’s average of $69.01 per barrel, raising inflationary concerns in India. The sharp rise followed an escalation in the West Asia crisis, with missile attacks on oil infrastructure in Iran, Qatar and Saudi Arabia. Brent crude futures for May delivery hit a high of $112.85 per barrel, with some analysts flagging the possibility of prices touching $130 per barrel in the coming days. The 2026 Iran war began on February 28, 2026.

India is the third-largest oil importer globally, and energy imports constitute a large part of its trade bill. Domestic inflation remained under control so far, but has shown worrying signs in recent months.

Data showed wholesale price index inflation increased to an 11-month high of 2.1 per cent year-on-year in February, led by higher food prices, compared with 1.8 per cent in January. This marked the fourth consecutive monthly increase, indicating a gradual build-up of price pressures. However, average WPI inflation in FYTD26 remained low at 0.4 per cent year-on-year, according to MOFSL.

Nuvama Institutional Equities said supply-led oil shocks are more detrimental to India than demand-led ones. During the demand-led oil spike of 2005-08, when prices rose 2.5 times, India’s current account deficit remained contained, the rupee appreciated and corporate margins expanded.

“But the current oil spike is supply-led, and West Asia is far more consequential to India than Russia-Ukraine. West Asia accounts for nearly $100 billion of inflows under the current account deficit, contributing 15 per cent of India’s exports and 40 per cent of inward remittances. Thus, CAD and balance of payments are the key areas of vulnerability when the capital account has turned negative for the first time in 30 years,” Nuvama said.

It added that the oil shock is expected to compress profit margins and hamper economic recovery, which has already been narrow. At least 10 sectors have been impacted recent LPG shortages. A report suggests 35 per cent of BSE 500 firms face micro issues.

On the domestic equity market, Rajesh Palviya, head of research at Axis Securities, said India’s growth fundamentals have so far provided a cushion against global volatility.

Citing US Federal Reserve Chair Jerome Powell’s remarks, he said rate-sensitive emerging markets may face intermittent headwinds as expectations of US rate cuts in 2026 are deferred. “In this environment, investors should brace for elevated volatility, focus on quality exposures, and closely monitor crude oil prices, which remain the critical link between geopolitical risks and India’s inflation and current account trajectory.”

The US Federal Reserve also flagged concerns over inflationary pressures. Powell noted that near-term inflation expectations have risen due to the Iran crisis and said there has been less progress on inflation than earlier expected, with geopolitical tensions adding to price pressures, Emkay Global said.

He added that rate cuts projected for 2026 may not materialise without further progress on inflation.

Nuvama noted that US debt and deficits are elevated, with the government’s interest burden set to overtake its defence spending. It added that traditional, low-cost sources of financing such as foreign central banks may no longer be as reliable.

“All these exert significant constraints on the US’s ability to sustain a prolonged conflict. This was not the case during the 1990 Gulf War or the wars in Iraq and Afghanistan,” it said, adding that the US’s debt position was stronger then and foreign governments were more willing to finance such conflicts.