Saturday, 16th May 2026: The prolonged conflict in West Asia is now beginning to impacting the Indian economy, with rising fuel prices, increased import duties on gold and silver and concerns over inflation likely to affect households in the coming weeks.
The prolonged tensions between the United States and Iran have disrupted global energy markets, particularly after concerns emerged over supply routes around the Strait of Hormuz, one of the world’s most important oil transit passages which handles almost 25% energy trade.
As fears over supply shortages increased, Brent crude oil prices surged from around $70-80 per barrel before the conflict to more than $120 per barrel at peak levels.
India, which imports nearly 90 percent of its crude oil needs, is highly vulnerable to such global price shocks. During the financial year 2025-26, India spent nearly $123.10 billion (₹10.89 lakh crore) on crude oil imports.
The situation has become more challenging because imports are paid for largely in US dollars. The Indian rupee, which was trading around ₹90-91 against the dollar at the beginning of 2026, has now weakened beyond ₹96 per dollar.
This means India has to spend significantly more in rupee terms to purchase the same quantity of oil, gold and other imported commodities from international markets.
India is also among the world’s biggest importers of gold and silver due to high domestic demand. In the last financial year, the country imported nearly $71.98 billion (₹6.77 lakh crore) worth of gold and around $12 billion (₹1.15 lakh crore) worth of silver.
Amid rising import costs and pressure on foreign exchange reserves, the Centre recently increased import duties on gold and silver from 6 percent to 15 percent. Petrol and diesel prices were also raised by ₹3 per liter in Delhi, with similar hikes seen across the country.
The government is attempting to reduce excessive imports and manage pressure on India’s dollar reserves, which currently stand at nearly $697 billion. Rising global uncertainty and investor withdrawals have also added pressure on reserves.
Prime Minister Narendra Modi had earlier appealed to citizens to reduce fuel consumption, avoid unnecessary gold purchases and work from home where possible to help reduce import dependence during the ongoing crisis.
Experts believe fuel prices could rise further if tensions continue in West Asia and oil supplies remain disrupted. Increased fuel prices are also expected to raise transportation costs, which may eventually push up prices of essential goods such as vegetables, milk and other daily-use products.
Travel expenses and logistics costs are also likely to become costlier, increasing inflationary pressure across sectors in the coming months.