The ongoing conflict in the Gulf involving Israel, Iran, and US assets may lead to global recessionary pressures, rising inflation, and financial market turbulence, as per a report by SBI Research. Despite this, domestic financial markets in India have been supported by RBI interventions like managing rupee volatility and G-sec yields. However, the report cautioned that prolonged conflict could still affect India’s macroeconomic indicators.
The closure of the Strait of Hormuz, a crucial passage for about 20% of the world’s crude oil, has already driven Brent crude prices up. Currently, crude oil prices stand at $91.84 per barrel for Brent and $89.62 for WTI. The report’s regression analysis suggests that a $10 per barrel increase in crude oil prices could widen the CAD by 36 bps in FY27.
In a worst-case scenario where oil prices reach $130 per barrel, SBI Research projects that India’s GDP growth could drop to 6%. The report also links the current conflict to the later stages of a Kondratieff Wave, indicating potential long-term structural impacts on global economies. It highlights that the United States might benefit from higher oil prices and a shift from Russian energy supplies to Europe, while other regions could face economic challenges.
