India could come under pressure from a weakening rupee, rising inflation and a widening current account deficit if the escalating conflict in the Middle East drives up energy prices and disrupts supplies, according to a report by Moody’s Ratings. The agency noted that India is particularly vulnerable among large Asian economies because of its heavy reliance on crude oil and liquefied natural gas (LNG) imports from the region.
India currently imports around 46 per cent of its oil and natural gas requirements from the Middle East. Supplies have been affected as the expanding conflict in West Asia has led to disruptions in the Strait of Hormuz, a crucial route used for exporting crude oil and LNG from the region.
Moody’s warned that higher energy import costs could put pressure on the rupee, fuel inflation and worsen the country’s current account balance. This situation could also complicate monetary policy and fiscal management, especially if the government is forced to increase subsidies to shield the economy from the impact of higher energy prices.
Strait of Hormuz a major risk point
According to the rating agency, the Middle East conflict presents significant risks for the global economy, particularly if it results in a prolonged disruption in energy markets. The Strait of Hormuz—a key shipping channel for oil and LNG—remains a critical chokepoint in global energy trade.
Although there has been limited damage to infrastructure so far and global energy inventories provide some short-term protection, shipping through the strait has largely stalled. Several regional ports have also suspended operations, disrupting oil and LNG trade.
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Moody’s cautioned that if navigation through the Strait of Hormuz remains disrupted beyond its baseline expectation of a few weeks, global energy markets could face sustained supply shortages. In such a case, Brent crude — the main international benchmark — could average above $100 per barrel, leading to higher inflation, tighter financial conditions and slower global economic growth.
Short disruption manageable
In its baseline outlook, Moody’s assumes that the conflict will be relatively short-lived and that shipping through the Strait of Hormuz will resume in the near term. Under this scenario, Brent crude prices are expected to average between $70 and $80 per barrel in 2026 — slightly higher than the $69 per barrel average recorded in 2025 — which would limit the broader impact on global economic growth.
The agency explained that its analysis is based on two possible scenarios: a baseline case where disruptions are brief, and a more severe scenario involving a longer and more damaging conflict.
If tensions ease and navigation through the Strait of Hormuz returns to normal, supply constraints in energy markets would likely be resolved quickly.
However, Moody’s warned that a prolonged disruption that drives Brent crude prices above $100 per barrel could place significant strain on energy-importing regions, particularly Asia and Europe.
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