MIDDLE EAST tensions escalate: India braces for economic impact

NEW DELHI: The intensifying violence in the Middle East has sent shockwaves through global financial markets, with significant implications for the oil and defence sectors.

- SIMONTINI BHATTACHARJEE

Rising oil prices, driven by fears of supply interruptions, have supported gains in the energy market. At the same time, geopolitical uncertainty has heightened risks for economies such as India, which rely significantly on regional oil imports. Any protracted disruption in Middle Eastern oil supplies might exacerbate India's energy security concerns, resulting in higher fuel costs that directly impact businesses and consumers.

India's economic links with the Middle East extend beyond oil to include commerce in machinery, medicines, natural gas, and fertilizers. A prolonged conflict in the region would not only impede these trade flows but would also result in higher global crude oil prices, putting central banks under pressure to regulate inflation. As energy prices rise, inflation may follow, undermining economic recovery efforts, particularly in emerging nations such as India. Speculation over impending Israeli strikes on Iran's oil infrastructure has spooked global markets. In India, where stock valuations are already high, the uncertainty may trigger a shift in foreign portfolio investments, with investors potentially migrating to safer assets such as bonds and gold. Although domestic investments have offered some stability so far, market volatility is anticipated to rise in response to future geopolitical developments.