New Delhi, Apr 13 (KNN) The ongoing conflict in West Asia is expanding in scale, disrupting global shipping, energy supplies and trade flows, according to a Crisil Intelligence report.
The report said the situation has triggered what is being described as one of the largest energy shocks on record, with the partial closure of key routes such as the Strait of Hormuz—responsible for nearly 20 per cent of global oil movement—and damage to major oil and gas infrastructure.
As a result, global growth is expected to slow to around 3.2 per cent in 2026, while oil and gas prices are projected to remain elevated amid supply constraints.
India Faces Growth and Cost Pressures
The report highlighted that India, being heavily dependent on energy imports, is particularly exposed to the crisis. Under a baseline scenario, GDP growth is projected at 7.1 per cent, but could moderate to 6.8 per cent if disruptions persist.
Higher crude oil prices, increased logistics costs, and constrained gas supplies are expected to raise input costs across sectors such as manufacturing, construction and services. Export growth may also slow due to shipping disruptions and weaker global demand.
The current account deficit is likely to widen due to a higher import bill, while inflation could see a modest rise driven by indirect cost pressures.
Sharp Rise in Energy and Logistics Costs
The report also noted, crude oil and natural gas prices have surged significantly since the onset of the conflict. Freight and insurance costs have also risen sharply due to rerouting of shipments and tanker shortages.
India has begun diversifying its crude sourcing to manage supply disruptions, though this has led to longer transit times and higher costs.
Key Risks Across Sectors
The impact is being felt across multiple sectors. In energy and fertilisers, India’s dependence on West Asia for oil, gas and fertiliser inputs raises risks to production and agriculture.
Exports are also vulnerable, with around 13 per cent of India’s goods shipments going to the region and logistics disruptions affecting trade flows.
Additionally, the region accounts for nearly 38 per cent of remittance inflows, exposing India to income risks from overseas workers.
Adverse Scenario Could Deepen Impact
In a prolonged conflict scenario, GDP growth could decline further to around 6.5 per cent, while inflation may rise to above 5 per cent, the report said.
Sustained high energy costs could squeeze corporate margins, weaken consumption, and push up borrowing costs, while also exerting depreciation pressures on the rupee.
Need for Structural Resilience
The report emphasised the need for long-term measures to reduce vulnerability to such shocks. These include diversifying energy sources, expanding strategic reserves, boosting renewable energy capacity, and strengthening domestic manufacturing and fertiliser production.
(KNN Bureau)
