Bhubaneswar, Jun 11: Global crude oil prices face renewed volatility as escalating tensions between the US and Iran threaten to disrupt energy markets.

A report by Oslo‑based Rystad Energy warns that hostilities could push prices as high as $150 per barrel, marking one of the most significant supply shocks in modern history.

With 11.8 million barrels per day of production shut across six Gulf producers, Brent crude has already spiked near $94.5, underscoring the fragility of the April ceasefire and global market stability.

If global crude oil prices surge to $150 per barrel, India’s economy will face significant turbulence. As the world’s third‑largest oil importer, India is highly vulnerable to sharp increases in energy costs, which ripple across inflation, trade balances, and fiscal stability.

Also read: West Asia Conflict Could Drive Crude Oil to $150 per Barrel

Inflationary Pressures

Fuel is a critical input for transport, manufacturing, and agriculture. Analysts estimate that every $10 rise in crude prices adds 0.4 percentage points to India’s Consumer Price Index (CPI).

At $150 per barrel, CPI inflation could rise by 1.2 percentage points, making essentials like food, electricity, and transport more expensive. This would squeeze household budgets and reduce disposable income, particularly for lower‑income families.

Fuel Price Impact

Retail fuel prices in India are directly linked to global crude benchmarks. With crude above $110 per barrel, fuel hikes become unavoidable. At $150 per barrel, petrol and diesel prices could rise by ₹26-30 per litre, even after excise duty adjustments.

LPG cylinders would also become costlier, directly affecting households, while aviation turbine fuel would spike, raising airline fares.

Analysts estimate that for every $10 rise in crude oil, LPG cylinder prices increase by ₹50-70. At $150 per barrel, LPG cylinders could rise by ₹400–500 per cylinder compared to present levels. That means a domestic LPG cylinder could cost ₹1,400-1,600, depending on city and subsidy status. Non‑subsidized cylinders in metros like Delhi, Mumbai, and Bhubaneswar would be at the higher end of this range.

A 19 kg commercial LPG cylinder currently costs around ₹1,700-1,800 in major cities. Commercial LPG is not subsidized, unlike domestic LPG, making it fully exposed to global crude price fluctuations. For every $10 increase in crude, commercial LPG prices typically rise by ₹80-100 per cylinder. At $150/bbl, prices could jump by ₹800-1,000 per cylinder compared to current levels. This means a commercial LPG cylinder could cost ₹2,500-2,800 in metros like Delhi, Mumbai, and Bhubaneswar.

Growth Slowdown

Higher energy costs act like a tax on the economy. India’s GDP growth could decline by 1 percentage point, slowing expansion momentum.

Rising input costs would erode corporate margins, forcing companies to either cut profits or pass costs onto consumers. Sectors such as transport, logistics, and manufacturing would be hit hardest.

External Sector Stress

India’s current account deficit (CAD), already sensitive to oil imports, could widen by 1.8 percentage points of GDP. This would weaken the rupee against the dollar, making imports costlier and further fuelling inflation.

Foreign exchange reserves would come under pressure as the government and RBI intervene to stabilize the currency.

Policy Response

The Reserve Bank of India (RBI) may be forced to raise interest rates sooner to contain imported inflation, tightening liquidity and raising borrowing costs.

On the fiscal side, the government may need to absorb excise duty losses or cut spending to maintain deficit targets. This would reduce fiscal space for welfare and infrastructure programmes.

Conclusion

At $150 per barrel, India cannot shield consumers fully. Petrol and diesel prices would jump by ₹26-30 per litre, inflation would rise, growth would slow, and both fiscal and monetary policy would tighten.

The shock would test India’s resilience and highlight the urgent need for energy diversification and stronger domestic alternatives.