India Faces Rupee And Inflation Risks From West Asia Conflict: Moody’s

India could experience pressure on the rupee, rising inflation, and a widening current account deficit if the escalating conflict in West Asia disrupts energy supplies and pushes crude oil prices higher, according to a note released by Moody’s Ratings.

The rating agency said India is among the large Asian economies most exposed to energy supply disruptions from the region because of its dependence on crude oil and liquefied natural gas imports.

According to Moody’s Ratings, India imports about 46% of its oil and natural gas requirements from West Asia. The region has been affected by a widening conflict that has disrupted energy trade and shipping routes.

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Strait Of Hormuz Disruption Raises Supply Concerns

Moody’s said the Strait of Hormuz remains a key risk point for global energy markets.

The Strait is a major shipping route for crude oil and liquefied natural gas exports from West Asia. The rating agency said that shipping along the route has mostly come to a halt, and some regional ports have stopped working, which has affected the trade of oil and LNG.

The disruption is happening in the middle of ongoing fighting in the area that has affected energy infrastructure and shipping.

Moody’s stated that a prolonged disruption to navigation through the Strait of Hormuz would likely lead to supply shortages in global energy markets.

According to the agency, sustained disruptions could push Brent crude prices above $100 per barrel, which would increase inflation and tighten financial conditions across several economies.

Impact On India’s Economy

Higher crude oil prices would increase India’s energy import bill and could weaken the rupee, Moody’s said.

The agency added that expensive energy imports could raise domestic inflation and widen the current account deficit if higher costs persist.

Moody’s also noted that rising energy prices could complicate monetary policy and fiscal management if the government expands subsidies to reduce the economic impact of higher fuel costs.

Energy-importing regions such as Asia and Europe are expected to face the most immediate pressure if oil prices remain above $100 per barrel for an extended period, according to the rating agency.

Short-Term Scenario And Global Outlook

Moody’s baseline scenario assumes that the conflict in West Asia will be relatively short-lived and that shipping through the Strait of Hormuz will resume after a limited disruption.

Under this scenario, Brent crude prices are projected to average $70–$80 per barrel in 2026, compared with an average of about $69 per barrel in 2025, according to the rating agency.

Moody’s said existing global crude inventories and advance shipments from Gulf producers could help limit the immediate impact of supply disruptions over the next few weeks.

However, the agency noted that the conflict remains fluid and could escalate further, which would increase risks to global energy markets, trade flows, and economic stability.