Finance Ministry Warns of Prolonged Global Uncertainty
New Delhi, March 6, 2026 — Escalating geopolitical tensions in West Asia could have deeper and longer-lasting economic consequences for India than initially anticipated, according to the February 2026 Monthly Economic Review released by the Finance Ministry.
The report notes that global uncertainty is likely to remain elevated as the conflict continues to unfold. Officials warned that if the crisis persists, it could significantly affect India’s exchange rate, current account deficit, and inflation levels.
Conflict Triggered by Strikes on Iran
According to the ministry’s assessment, the geopolitical situation intensified dramatically following the February 28 joint strikes by the United States and Israel on Iran, which resulted in the death of Iranian Supreme Leader Ali Khamenei.
The attack prompted retaliatory threats from Tehran and heightened fears of broader regional instability.
One of the most immediate concerns has been disruption to shipping through the Strait of Hormuz, a vital maritime passage that carries nearly 20 percent of the world’s oil supply. Any prolonged disruption to this route could significantly impact global energy markets.
Oil and Gas Prices Already Rising
The report states that energy markets have already reacted strongly to the conflict:
- Brent crude oil prices have risen about 9 percent, reaching nearly $80 per barrel.
- Liquefied natural gas (LNG) prices have surged by roughly 50 percent.
Finance Ministry analysts noted that such shocks echo the dramatic oil price spikes experienced during the Gulf War, which had major consequences for global economies, including India.
India’s Economy Still Relatively Resilient
Despite the turbulence, the report highlights that India currently remains relatively well-positioned to absorb short-term shocks.
Key strengths include:
- Strong foreign exchange reserves
- A low current account deficit (CAD) of 0.8% of GDP in the first half of FY26
- Moderate inflation levels
These factors provide a buffer against sudden global disruptions.
Risks Could Grow if Conflict Continues
However, the ministry cautioned that the situation could deteriorate if hostilities persist for a prolonged period.
Potential risks include:
- Pressure on the Indian rupee if global investors shift funds toward safer assets
- Higher import costs due to rising energy prices
- Supply chain disruptions in sectors dependent on imported fuels
Industries particularly vulnerable include fertilisers and petrochemicals, which rely heavily on LNG and crude oil inputs. Sustained increases in energy costs could eventually translate into broader inflation across the economy.
Government Reassures Energy Supply
Meanwhile, India’s Petroleum Minister Hardeep Singh Puri sought to reassure the public that the country’s fuel supply remains stable.
“Our priority is to ensure the availability of affordable and sustainable fuel for our citizens, and we are doing it comfortably,” Puri said, adding that there is no shortage of energy in India.
Similarly, Indian Oil Corporation dismissed social media claims suggesting shortages of petrol or diesel, calling them baseless rumors.
Long-Term Implications
The Finance Ministry emphasized that the conflict’s long-term consequences could extend far beyond immediate oil price fluctuations. If regional tensions continue to threaten key supply routes or destabilize energy infrastructure, global energy geopolitics could shift significantly for years to come.
For India, policymakers will need to remain vigilant and prepared to respond to possible shocks affecting energy markets, capital flows, and international trade dynamics as the situation evolves. (ANI)
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