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What Could Rising Tensions in Middle East Mean for India & World Economy? Impact on Oil and Rupee Explained
As if the Hamas war was not enough that the escalation of tensions between Iran and Israel has added fuel to the fire in Middle East. The so-called retaliatory drone attack on Israel by Iran on Sunday is making the world anxious about this will pan out for the economies and geopolitics.
Global leaders, including UN chief Antonio Guterres, have called for restraint to avoid any further escalation, as the “Middle East is on the brink”, and the world could not afford more wars.
US President has already warned Israel that it would not take part in a counteroffensive against Iran after the weekend attack that involved 300 missiles and drones
While Israel and allies including the US, UK and France managed to mostly foil the unprecedented attack by Iran, stock markets in Israel, Saudi Arabia and some other countries in the Middle East fell on Sunday, but only slightly.
Will Oil Take a Hit?
Bloomberg reported that oil prices rose in the wake of the Syria strike, with Brent climbing above $90 a barrel and analysts saying it could reach $100 on a direct conflict between Iran and Israel. The Israeli shekel weakened and neared its weakest level this year.
India is also keeping a close eye on the tensions in Middle East, considering 80% of its crude oil requirements are imported, a surge in prices would impact the country’s growth, inflation, rupee and balance of trade.
India has called for immediate de-escalation of hostilities between the two sides that threaten regional peace and security, and return to the path of diplomacy.
Though the pressure on petrol and diesel prices is unlikely until mid-June due to the Lok Sabha Election, but oil retailers will feel the burden on profits, and could increase the subsidy bill for the government.
Oil production in the Middle East amounted to roughly 30.7 million barrels per day in 2022, accounting for 31.3% of the global total, according to data from intelligence platform statista.com.
Moreover, higher oil prices also mean higher food prices — not just in the Middle East but across the world. That would intensify food insecurity, already high in many developing countries.
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