How costly is crude oil crisis for India? Ex-Niti Aayog chief warns every $10 spike could cost India $14 billion

Every $10 per barrel increase in global crude oil prices could add about $13–14 billion to India’s annual import bill, widen the current account deficit and put pressure on the rupee, former G20 Sherpa and ex-NITI Aayog chief Amitabh Kant said on Thursday amid rising tensions in West Asia.

In a post on social media platform X, Kant said geopolitical shocks will continue to test India’s energy security and called for accelerating the transition to reliable clean power.

“Every $10 per barrel rise in crude prices can add $13–14B to India’s annual import bill, widen the current account deficit and pressure the rupee. Geopolitical shocks will keep testing our energy security,” he said.

Kant emphasised that India’s focus should not just be on adding renewable capacity but on ensuring reliable and scalable clean power.

“India’s next step isn’t just adding clean capacity but delivering reliable clean power at home: high-PLF solar-wind hybrids, electric vehicle momentum, modern grids, large-scale batteries and pumped hydro storage, and firm low-carbon baseload like nuclear,” he said.

His remarks came as global oil prices surged following escalating hostilities involving the United States, Israel and Iran, which have disrupted energy flows in the Gulf region.

Ratings agency Fitch, however, said the effective disruption of shipping through the Strait of Hormuz is likely to be temporary and may not significantly push crude prices above its baseline estimate.

“We do not expect significant upside to our December 2025 assumption of an average Brent oil price of $63 per barrel for 2026,” Fitch said in a note, adding that global oil market oversupply should limit price rises and mitigate disruptions to Iranian oil supply.

Brent crude prices have already climbed to around $82–84 per barrel from an average of about $66–67 in January–February this year.

The spike follows joint US and Israeli military strikes on Iran on February 28, after which Tehran launched drones and missiles at Israel, US military facilities in the Gulf and targets near Dubai, raising fears of wider disruptions to energy supplies.

The Strait of Hormuz, a narrow 33-kilometre passage linking the Persian Gulf to the Arabian Sea, is one of the world’s most critical oil transit chokepoints.

Fitch said about 20 million barrels per day of crude oil and petroleum products, roughly a quarter of global seaborne oil trade and about a fifth of global consumption, normally pass through the strait.

Around half of the oil transported through the route comes from Saudi Arabia and the UAE, with the remainder from Iraq, Kuwait and Iran. About half of these exports are shipped to Asian markets including China and India.

"A protracted closure would affect both exporting and importing countries and therefore is not our baseline assumption. If the strait were to remain effectively closed for a protracted period, naval protection for tanker navigation could be considered, as occurred during the 1980s Iran–Iraq war," Fitch said.

US President Donald Trump on Tuesday signalled that the US Navy will, if necessary, begin escorting tankers through the Strait of Hormuz.

The agency also said the global oil market is currently oversupplied, which should limit the geopolitical risk premium.

Global oil supply rose by about 3 million barrels per day in 2025, while demand growth remained below 1 million barrels per day, a trend Fitch expects to continue in 2026.

Iran produces about 3.5 million barrels per day and exports around 2 million barrels per day, accounting for roughly 3.5% of global crude production.

Fitch said any potential supply disruption would be offset by global market oversupply.

Meanwhile, oil prices extended gains on Thursday amid supply disruptions linked to the conflict.

Brent crude rose $2.35, or 2.9%, to $83.75 per barrel, while US West Texas Intermediate climbed $2.42, or 3.2%, to $77.08.

Market analysts said the oil market is tightening as some producers cut output and governments take steps to secure supplies.

China has asked its largest refiners to suspend exports of diesel and gasoline.

European diesel futures surged to $1,130 per tonne, their highest level since October 2022.

Ship-tracking data from Vortexa and Kpler showed about 300 oil tankers stranded inside the Strait of Hormuz as vessel traffic in and out of the chokepoint slowed sharply after the outbreak of war.

Iranian forces have reportedly struck oil tankers in or near the strait, while explosions were reported overnight near a tanker off Kuwait, according to the United Kingdom Maritime Trade Operations.

Iraq has cut output by nearly 1.5 million barrels per day due to storage constraints and export disruptions, while Qatar has declared force majeure on liquefied natural gas exports, with normal production levels expected to take at least a month to resume.