Crude Up, Slide May Hit Economy

What West Asia conflict means for India

- VISMAY BASU @ New Delhi

If the conflict in West Asia persists, India's foreign exchange reserves could face pressure as two adverse external dynamics converge: a sustained rise in Brent crude prices and continued depreciation of the rupee.

Brent crude, the benchmark for India's oil imports, has climbed in recent weeks, driven by escalating tensions between Iran and Israel. Fears of a wider regional conflagration—especially one that disrupts the Strait of Hormuz, through which nearly 20% of global crude flows—have triggered speculative surges in global oil markets. Although intermittent diplomatic efforts have helped temper price spikes, Brent remains significantly elevated by recent standards.

For India, which relies on imports for over 85% of its crude oil needs, such volatility is particularly consequential. The situation is further compounded by the rupee's depreciation. Between June 2 and 19, the currency fell from ₹85.35 to ₹86.84 per US dollar—a 1.75% decline.