The global conditions have been highly unstable lately. When a war happens, it is not limited to the country involved by influences the market worldwide. India is a developing country with the need to import and export in order to maintain stability. The geopolitical conflicts have affected the Indian markets. Understanding its impact is important as it not only affects the country at the national level but also at the individual level in the form of inflation.
This article gives a deep insight and understanding of the impact of wars and other geopolitical tensions on the Indian market.
1. Inflation and Oil Price Volatility
A. Iran-Israel Conflict
India highly depends on imports to fulfil its oil demand, importing between 4.7 and 5 million barrels per day in 2025. During the height of the conflict, crude prices briefly reached $81 per barrel, but following the U.S.-brokered ceasefire on June 24, 2025, they fell more than 15% to below $70. India’s inflation and overall economic stability are directly impacted by this volatility.
40% of oil imports pass through the Strait of Hormuz, a maritime point that is currently experiencing geopolitical tension. This route is crucial even though India is moving towards more diverse sourcing, particularly from the US and Russia.
B. Impact on India
Changes in oil prices have a direct effect on India’s retail inflation (CPI) because they have a domino effect on:
- Costs associated with logistics and transportation
- Industrial production and manufacturing
- Consumer prices for energy and fuel
According to SBI Research, for every $10 increase in the price of crude oil, there are:
- A 25 – 35 basis point rise in CPI inflation
- A decline in real GDP growth of 20–30 basis points
As observed in previous global crises, a sudden spike to $130 per barrel could cause India’s GDP growth to slow to about 5.1%, straining its current account and depreciating the rupee, both of which reduce consumer purchasing power.
C. Gainers and Losers from Changes in Oil Prices
Although declining oil prices reduce inflation, the impact differs depending on the industry:
| Oil Price Movement | Negative Impact | Positive Impact |
| Rise in Crude Prices | Inflation, fiscal pressure, and GDP slowdown | Gains for upstream oil companies like ONGC, Oil India |
| Fall in Crude Prices | Revenue loss for upstream oil firms | Margin boost for refiners (HPCL, BPCL, IOC) and paint, aviation sectors |
2. Domestic Resilience & India-Specific Context
India has demonstrated exceptional economic resilience in 2025 in spite of growing global uncertainties, including the Iran-Israel conflict, high U.S. interest rates, and disruptions in international trade. Reserve Bank of India’s (RBI) June 2025 bulletin highlights the same.
In May 2025, retail inflation dropped from 3.16% in April to 2.82%, the lowest level in more than six years. In order to encourage credit and investment without running the risk of price instability, the RBI has been able to lower the Cash Reserve Ratio (CRR) and its policy rate by 50 basis points. Monetary conditions are still accommodative, which is driving growth momentum, as inflation has now been below the RBI’s target for four months in a row.
Strong Indicators:
- In 2024–2025, agricultural output increased broadly across major crops, meeting demand in rural areas.
- Infrastructure and capital expenditure-related activity continue to support robust industrial output.
- The services sector is growing steadily, with communication, transportation, and finance at the forefront.
- Following policy rate reductions, credit transmission is improving, and financial markets are stable.
| Indicator | Current (2025) | Comment |
| CPI Inflation (May 2025) | 2.82% | 6-year low; supports monetary easing |
| RBI Policy Rate (Repo) | Reduced by 50 bps | To stimulate demand amid external risks |
| Credit Growth | 14% | Improving with an accommodating policy |
| Agricultural Output | Broad-based increase | Enhances rural stability and food inflation control |
| Forex Reserves | >$600 billion | Adequate to cover imports and defend the currency |
3. Sectoral Risks
Let us look at the sectoral risk that India is facing amid the global uncertainty.
| Sector | Primary Risk Factors | Vulnerability Level | Short-Term Outlook |
| Infrastructure | Input cost inflation, delayed execution, and funding constraints | Medium | Stable to Positive |
| Building Materials | Margin pressure, demand sensitivity to interest rates | Medium–High | Cautious |
| Banks – Private | Currency volatility, slower credit offtake | Low | Positive |
| Banks – PSU | Asset quality concerns, exposure to stressed segments | High | Neutral to Weak |
| Chemicals | Global demand volatility, dumping from China, price swings | High | Cautious |
| FMCG | Weak rural demand, valuation risk, broken distribution channels | Medium | Mixed |
| Pharma & Healthcare | Regulatory changes in the US, pricing pressure, and currency-linked exports | Medium | Stable to Positive |
| Oil & Gas -Upstream | Falling crude prices, project delays | High | Negative |
| Oil & Gas –-Downstream | Freight inflation, retail margin fluctuation | Medium | Positive |
Bottomline
The conclusion can be drawn that it is important to understand the global uncertainty. India mainly depends on imports for its oil needs, which are affected due to the war. Oil price affects the inflation rate as the cost of transportation increases. However, the table above will help you understand the positive aspects as well. Indicators like CPI and RBI help in understanding the India-specific impact in a better way.
The Indian market is developing and hence volatile due to events that take place around the world. Understanding this will empower you in better decision-making regarding investment.
