New Delhi, Apr 22 (KNN) A prolonged disruption in global energy supply triggered by West Asia conflict could widen India’s trade deficit and strain its fiscal position, according to Moody’s Ratings.
The agency noted that Brent Crude prices have surged by around 31 per cent since the outbreak of conflict involving the United States, Israel and Iran on February 28. Prices have remained volatile, reacting sharply to geopolitical developments and prospects of de-escalation.
As the world’s third-largest crude importer, India is particularly vulnerable to rising oil prices, which tend to increase the import bill, fuel inflation and compress corporate margins.
Impact on Markets and Investment
Higher energy costs and global uncertainty have already impacted investor sentiment. Foreign investors have pulled out approximately USD 18.6 billion from Indian equities so far in 2026, with March alone witnessing record net outflows.
Moody’s Ratings said, “Given lingering risks and because some production operations in the Middle East and logistical assets will take time to restart and reposition, risk premia and key commodity prices will likely remain structurally higher for some time,” Reuters reported, citing a report on Monday.
Growth Outlook and Fiscal Risks
The rating agency, which maintains a ‘Baa3’ rating with a stable outlook on India, has revised its GDP growth forecast for FY2027 to 6 per cent from 6.8 per cent earlier, factoring in the impact of the conflict.
It cautioned, “A prolonged disruption would pose more material challenges, potentially entrenching inflation, straining fiscal and monetary policy flexibility and testing external investor confidence.”
Sectoral Impact
The impact of rising crude prices is expected to vary across sectors. Oil marketing companies (OMCs) and fuel-intensive industries such as cement and chemicals are likely to face the greatest pressure.
“Cost hikes associated with inland transportation have been contained for now through fuel subsidies borne by state-owned OMCs, but this has shifted cost pressures onto their balance sheets in a manner we view as unsustainable,” Moody’s added.
(KNN Bureau)
