“We are closely watching the situation,” a senior government official told ET.Prime Minister Narendra Modi also chaired a meeting of the Cabinet committee on security to assess the situation, upon his return from a two-day tour of the states.Israel and the US launched joint strikes on Iran early on Saturday, including attacks on “dozens of military targets” carried out as part of a “wide, coordinated, and joint offensive,” killing Iran’s supreme commander Ayatollah Ali Khamenei.Economists fear increased volatility in the stock and energy markets, as well as the rupee, over the prospect of prolonged turmoil in the Gulf.India is one of the economies in Asia that’s more exposed to higher oil prices, said Sonal Varma, managing director and chief economist, India and Asia ex-Japan, Nomura.“The impact on India will be via the indirect channel — oil price increase and risk-off sentiment,” said Anubhuti Sahay, head of India economic research at Standard Chartered Bank. “While the current account deficit remains manageable at ~1% of GDP, the main risk comes from capital account pressures due to foreign investment outflows, which could worsen due to geopolitical uncertainty,” she said.Every 10% rise in oil price leads to the current account deteriorating by 0.4% of GDP.“We think this is a short-term risk, but it is manageable, and India’s medium-term outlook remains positive,” Varma added.“We are watchful of the evolving developments and how the uncertainty would impact Indian macros,” said Aditi Nayar, chief economist, Icra . “As of now, the robust domestic outlook provides respite.”She said “the extent that it (the Iran situation) prolongs and widens would have a bearing on India's macros, including things like the impact of fuel prices on inflation and the twin deficits, as well remittances.” Retail inflation was 2.75% in January.Madan Sabnavis, chief economist at Bank of Baroda , said bond yields are unlikely to be affected but rupee volatility could intensify.
Author: Deepshikha Sikarwar
Published at: 2026-03-02 00:00:00
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