By Anjali Sharma
WASHINGTON – According to a report by SBI Research released on Sunday stated that the ongoing conflict in West Asia could trigger a fresh wave of global inflation if it spreads across supply chains, financial markets and jurisdictions, although India may remain relatively insulated compared to many economies.
The report noted that the escalating Israel-Iran conflict has heightened geopolitical tensions in the region, with Iran launching strikes on US-linked assets in Bahrain, Kuwait, Qatar and the UAE following attacks on its territory.
The situation intensified after Iran closed the strategically critical Strait of Hormuz, through which around 20% of the world’s crude oil supply transits.
The disruption has pushed global oil prices higher, with Brent crude rising from about USD 58.92 per barrel in December 2025 to above USD 89 per barrel in early March 2026, reflected the market’s sensitivity to supply risks in the region.
According to the report, the immediate inflationary impact of the conflict may be limited, prolonged tensions could disrupt trade routes, weaken business sentiment and heighten uncertainty across global markets.
SBI Research also suggested that the United States could emerge as one of the economic beneficiaries of an extended conflict due to its large oil and gas production capacity.
The report noted that the US has significantly increased LNG exports to Europe after the region reduced dependence on Russian gas, with US supplies accounting for nearly 58% of the EU’s LNG imports in 2025.
It stressed that for India, the economic impact may be relatively contained but not insignificant.
The report highlighted that the country imports nearly 90% of its crude oil requirements, and about 40% of these imports pass through the Strait of Hormuz.
Any prolonged closure of the route could therefore disrupt supplies and increase import costs. India’s inward remittances may also face pressure, it added.
The report noted that personal remittances rose to about USD 138 billion in FY25, with around 38% coming from Gulf Cooperation Council (GCC) countries.
A slowdown in oil-driven economic activity in the Gulf could affect these flows. Trade with the region could also be affected if the conflict drags on.
GCC countries account for about 13% of India’s exports and over 16% of imports, making the region an important trade partner, the report said.
The report warned that higher oil prices could widen India’s current account deficit, increase inflation and dampen growth.
It is estimated that every USD 10 per barrel rise in crude prices could widen the current account deficit by about 36 basis points, increase inflation by 35–40 basis points and reduce GDP growth by 20–25 basis points.
It said that in a worst-case scenario where oil prices rise to around USD 130 per barrel, India’s GDP growth could slow to about 6 per cent in FY27 from an assumed 7% baseline, it said.
The report noted that proactive measures by the Reserve Bank of India, including market interventions to stabilize bond yields and manage rupee volatility, have so far helped cushion domestic financial markets from external shocks despite the risks, the.
It concluded that West Asia conflict poses significant global economic risks, India’s diversified energy sourcing, policy interventions and financial stability mechanisms could help mitigate the impact in the near term.
