Sankhanath Bandyopadhyay, Senior Economist, Infomerics Analytics & Research (IARPL)

The U.S. military’s clenching dominance under President Donald Trump is trembling global geopolitics, including Asia. While the manoeuvre was operated in cooperation with Israel, in early Jan’26, U.S. forces detained Venezuela President Maduro. Subsequently, they executed Iran's supreme leader Ayatollah (Ali) Khamenei. The successor, Mojtaba Khameini, son of Ali Khameini is yet to appear Publicly due to different reasons.

Amid the skyrocketing oil prices, and the slowdown of supplies from Abu Dhabi, Iraq, Kuwait, Japan plans to release fifteen days’ worth of private sector oil reserves. The situation is summed up well by a global trader “Venezuela got destabilized. Iran got bombed. Oil ripped to new highs.” The spokesperson for Iran has already stated to get ready for oil at 200 accusing US and Israel for destabilising regional security. The International Energy Agency (IEA) assured recently through a press release on 11 March’26, that it would release 400 million barrels oil from their reserves. As per the release, IEA members hold emergency stockpiles of over 1.2 billion barrels, with a further 600 million barrels of industry stocks held under government obligation. This stock release is the sixth in the history of the IEA, which was created in 1974. Previous collective actions were taken in 1991, 2005, 2011, and twice in 2022.

India's dependence on Middle Eastern crude makes it the most exposed major emerging economy. India remains dominant importer of oil from Russia even after US sanction. However, despite recent allowance by US for one month import from Russia, certain big financial entities refrain due to uncertainty. Nonetheless, in aggregate, India remains dominant importer of oil from Russia. As per media news, India purchased around 263 million tonnes (mts) of crude oil from different countries, of which around 85 million tonnes or 32.3 per cent is sourced from Russia. In March’26, India’s sourcing oil from Russia have increased by 45 per cent, followed by Saudi Arabia. 

Let’s dive into the impact of war on different industries/sectors. As urea plants need natural gas as crucial raw material, a prolonged disruption of LNG through Hormuz could affect the fertiliser sector severely. The catastrophe can happen through both the external balance (CAD) and domestic inflation channel. Due to shipping bottlenecks and supply chain disruptions arising out due to closure of Hormuz could hamper exports like Basmati, tea, spices and other crucial exportable of which Iran and other countries are major destinations. There are other factors like rising freight & insurance costs, petrochemical feedstocks using crude derivatives (paint, tyres, plastics) face a margin squeeze due to increased raw material costs. Textiles, garments, and low-end engineering products are severely impacted by high freight charges and insurance premiums. Moreover, the future CPI could be on the upside due to such factors and metal prices hardening.

Our internal research has exhibited that India faces vulnerability through its oil import dependency, while Western economies face inflationary pressures, disrupted shipping corridors, and defence-spending realignment. Under the worst-case prolonged-conflict scenario, Brent crude could breach USD 130/bbl, aviation and logistics costs could surge by 18–22%, and Indian GDP growth could be trimmed by 80–120 basis points for FY 2025–26. 

However, swift de-escalation would limit commodity spikes and market volatility to short-term corrections, reinforcing the critical importance of diplomatic resolution. There are certain cash flow pressure on the Indian oil marketing companies (OMCs) due to enduring oil and gas supply disruption tied to the Iran conflict. A sustained closure of the Strait of Hormuz or persistent high oil prices beyond a few quarters could pressure profit margins despite government support.

There is as of now certain guesstimates about how the global oil geopolitics will play around. As already highlighted by the Indian Union Petroleum and Natural Gas Minister, Shri Hardeep Singh Puri, alternate fuel options are being activated to ease pressure on LPG and gas channels. India needs to find alternative solutions, as geopolitical tensions have become the new norm. India is already trying this by diversifying its crude import basket, expanding strategic petroleum reserves (SPR) and improving refining flexibility. The Government of India has already launched the Ethanol Blending Programme (EBP) with the objective of reducing import dependence on crude oil, saving foreign exchange, and promoting clean fuel alternatives, as well as Oil Marketing Companies (OMCs) are mandated to blend ethanol procured from multiple feedstocks. Further, India is expanding a Sustainable Aviation Fuel (SAF) ecosystem, aiming specific mandatory blend and utilizing abundant agricultural waste, used cooking oil. 

(The author is grateful to Hinika Lodha, Analyst -IARPL for inputs regarding alternate resources