How much damage can a $10 crude spike do to India’s GDP?

SMC Global Securities’ Vandana Bharti says rising West Asia tensions are adding a “war premium” to crude prices, increasing risks for India’s growth, inflation and energy supply.

• $10 oil price hike may reduce India's GDP growth by 0.5%
• India imports nearly 50 percent of crude oil from the Middle East
• Higher oil prices could raise fertiliser and agriculture costs

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Every $10 increase in global crude oil prices could reduce India’s GDP growth by about 0.5 percent, reflecting the country’s heavy dependence on imported oil and its exposure to volatility in global energy markets, Vandana Bharti, Research Head – Commodity at SMC Global Securities, told ANI.

Speaking to ANI in an exclusive interview, Bharti said rising geopolitical tensions in West Asia have created a real economic risk for India as crude prices surge and supply chains face potential disruption.

“Every $10 hike in crude oil prices hurts India's GDP by about 0.5 percent. We have already seen crude prices rise by around $10 to $15 recently, so the impact will eventually be reflected in economic activity and GDP figures,” Bharti told ANI.

West Asia tensions pushing up oil prices

The increase in oil prices comes amid escalating tensions involving the United States, Israel and Iran in West Asia, particularly around the Strait of Hormuz, a key maritime route through which roughly 20–25 percent of global oil shipments pass.

Bharti said the geopolitical conflict has introduced additional uncertainty in energy markets and added what she described as a “war premium” to global crude prices.

“It is not simply about closing the Strait of Hormuz. The real issue is that insurance premiums and freight charges are rising, and shipments are being rerouted. All these factors add a war premium to crude oil prices and create uncertainty in the market,” she told ANI.

According to Bharti, risks extend beyond shipping disruptions to energy infrastructure itself.

“They are targeting energy sites, whether crude oil facilities or LNG plants. There are also risks to seabed cables and other infrastructure. So the threat is not only to energy supply but also to broader global connectivity and trade,” she said.

Crude prices rise sharply within a week

Crude oil prices have already moved higher as tensions intensified across the region.

Bharti noted that oil prices climbed from around $69 per barrel to nearly $78 per barrel within a week.

“In just one week we have seen crude move from about $69 to $78 per barrel. If the tensions continue, prices could move towards $85 to $87 per barrel in the coming days,” she told ANI.

India’s dependence on Middle Eastern crude

India remains particularly exposed to such price shocks due to its reliance on imported oil.

Bharti said around half of India’s crude oil imports come from Middle Eastern countries, making the country vulnerable to disruptions in the region.

“India imports nearly 50 percent of its crude oil from the Middle East, and many Indian refineries are designed to process Middle Eastern crude. So any disruption in that region directly impacts supply and pricing,” she said.

India maintains strategic petroleum reserves that can help address short-term supply disruptions. However, Bharti said these reserves would primarily serve emergency situations.

“We have reserves for about 25–30 days for emergency situations, but nearly half of our crude oil supply comes from the Middle East,” she told ANI.

She added that even short-term disruptions could create volatility across Asian markets.

“Even a two-week disruption in supply can create major volatility in Asian markets. We have already seen currency pressures, equity outflows and economic uncertainty across the region,” Bharti said.

Possible supply adjustments and OPEC response

Bharti said India may mitigate some of the risks by diversifying crude import sources.

“Russia has been offering crude oil at discounted prices, and India may increase imports from Russia or other suppliers if required. Rerouting supply chains and renegotiating trade agreements can provide some cushion to the Indian economy,” she told ANI.

She also noted that members of the Organisation of the Petroleum Exporting Countries (OPEC) have indicated they may attempt to manage price spikes, though security concerns may constrain immediate increases in supply.

Impact beyond crude: fertilisers and agriculture

According to Bharti, higher energy prices could also affect fertiliser production costs and agricultural inputs.

“This could increase the cost of the upcoming kharif crop, as fertilisers and other inputs may become more expensive,” she said.

Renewables seen as long-term strategic response

Bharti said the current geopolitical crisis also underscores the need to accelerate investment in renewable energy.

“Such geopolitical disruptions are an eye-opener. Governments may increasingly focus on renewable energy like solar power so that dependence on volatile fossil fuel supply routes can be reduced,” she told ANI.