Add Zee Business as a Preferred Source
Crude above $100: How oil surge could hit GDP, inflation, rupee, CAD — Explained
Crude oil prices have surged past $100 per barrel amid escalating West Asia tensions, raising risks for India’s growth, inflation, rupee stability, and current account deficit.
)
Crude above $100: How oil surge could hit GDP, inflation, rupee, CAD — Explained. Representational Image
Written By: Ankit Kumar
Updated: Thu, Mar 19, 2026
08:54 PM IST
08:54 PM IST
New Delhi, ZeeBiz WebDesk
Crude oil prices have surged past the $100 per barrel mark, with Brent briefly crossing $110, as fresh geopolitical tensions in West Asia disrupt supply chains and push risk premiums higher. According to a March 19 report by Motilal Oswal Financial Services, attacks on key energy infrastructure, disruptions around the Strait of Hormuz, and tighter global supply have combined to keep oil markets volatile. For India - which imports around 85 per cent of its energy needs - this spike is not just a commodity story but a full-blown macroeconomic challenge, with implications for growth, inflation, the rupee, and the current account deficit.
Why are crude prices surging again?
The latest spike in oil prices is being driven by escalating conflict in West Asia. An airstrike on Iran’s South Pars gas field and damage to Qatar’s Ras Laffan LNG hub have intensified fears of supply disruptions.
At the same time, attacks near critical shipping routes such as the Strait of Hormuz have raised concerns about the safe movement of oil cargoes. Even though some flows continue, the market remains tight, with any further escalation likely to push prices higher.
TRENDING NOW
Adding to this, the Brent-WTI spread has widened, signalling tighter global supply compared to relatively stable US markets, partly cushioned by strategic petroleum reserve releases.
Temporary relief, but risks remain elevated
There are signs of limited relief. Iraq and Kurdish authorities have resumed some exports via Turkey’s Ceyhan port, and selective shipments are still reaching countries like India and Pakistan.
However, these incremental supplies remain too small to offset the broader disruption across the Gulf. The market continues to factor in a significant geopolitical risk premium.
Even policy measures such as the US temporarily easing shipping rules are unlikely to materially cool prices, as global crude dynamics - not logistics - remain the key driver.
What futures markets are signalling?
Oil futures are hinting that supply might loosen up, but it’s not going to be a game-changer. Brent’s forward curve is still in backwardation, which basically signals that there aren’t enough barrels to go around right now.
Short-term contracts have shot up lately, while futures further out show prices slowly cooling down to about $75 a barrel by late 2026. Still, that’s a big jump from what people expected before—closer to $60 or $65. Looks like higher prices are here to stay.
How could higher crude hit India’s GDP?
Higher oil prices pose a direct risk to India’s economic growth. According to the report, every $10 increase in crude prices could shave 30-40 basis points off GDP growth.
If oil sustains above $90-100 per barrel, growth could slip below the 7 per cent mark, compared to the base assumption of around 7.5 per cent.
Energy-intensive sectors - including chemicals, cement, tyres, packaging, and quick-service restaurants are already facing cost pressures and supply constraints, which could weaken demand and margins.
CAD pressure: India’s external balance at risk
Oil accounts for nearly 23 per cent of India’s import bill, making it a critical factor for the current account deficit.
A $10 rise in crude prices could widen the oil import bill by $10-12 billion, pushing the CAD higher. Estimates suggest the CAD could expand from around 1.1 per cent of GDP to as much as 2.4 per cent if oil averages $90-100 per barrel.
While India’s foreign exchange reserves provide a buffer, sustained high oil prices could still put pressure on the rupee, with projections indicating a possible move towards 93-95 against the US dollar.
Inflation risks: Fuel to food spillover
Rising crude prices are a key driver of inflation in India. A $10 increase in oil could add 30-50 basis points to inflation, potentially pushing headline CPI closer to the 5 per cent mark if crude remains elevated.
The impact is not limited to fuel. Higher shipping costs, rising fertiliser prices, and supply chain disruptions could spill over into food inflation.
In addition, increased war-risk insurance premiums and LPG supply concerns may further amplify price pressures across sectors.
Fiscal deficit: Govt faces tough trade-offs
Higher oil prices also complicate fiscal management. If the government chooses to shield consumers by cutting excise duties or increasing subsidies, it could widen the fiscal deficit.
On the other hand, passing on higher prices to consumers would fuel inflation and hurt demand.
The final impact will depend on how much of the cost is absorbed by the government versus passed through to end-users, making policy decisions critical in the months ahead.
Gas shock adds to the pressure
The oil shock is being compounded by a sharp rise in natural gas prices, which have surged around 80 per cent this year.
Supply disruptions in key facilities across West Asia, combined with precautionary shutdowns, have tightened global gas markets. In India, this has already led to restricted gas supply for industrial users and higher input costs for several sectors.
Read More: Crude @ July 2022 High: Every $10 rise eats into tyre & paint margins | Risk math explained
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
Ankit Kumar
Ankit Kumar
RECOMMENDED STORIES
)
)
)
)
)
)
)
)
)
)
)
)
)
RELATED NEWS
Petrol & Diesel Update: India to continue Russian oil imports; no crude shortage, says Govt
Crude oil prices tumbles over 10% as US reportedly moves closer to Iran war deal
Oil, gas price surge could impact India’s fiscal deficit target: ICRA
Nayara Energy raises petrol price by Rs 5.30/litre; check rates in Delhi, Mumbai, other cities
Gold prices rebound above Rs 1,44,000, silver near Rs 2,36,000: Why bullion is rising despite strong dollar, high interest rates
