India's GDP May Take Up To 4% Hit If Middle East Conflict Persists: Moody’s

India’s Gross Domestic Product may decline by a maximum of 4% in comparison to the baseline if the Middle Eastern conflict continues. This is based on Moody’s Analytics. India has been ranked among the worst-hit economies in the Asia-Pacific region by Moody’s Analytics, along with South Korea and China. 

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This is because India depends on the import of oil and gas from the Middle Eastern countries. Moody’s Analytics pointed out that disruptions in the supply of these commodities may impact economic activity.

Impact Of Rising Energy Prices

Crude oil prices have increased sharply amid the conflict, with Brent crude rising nearly 60% compared to February 27 levels, according to Reuters. Increased energy costs are expected to result in higher inflation levels, as well as an increased trade deficit, since India imports a substantial amount of its crude oil demand.

According to the report, higher oil prices have the potential for a cascading effect on the economy, which includes input costs, consumption, as well as trade balance.

Growth Outlook For India

Despite the risks, India is projected to remain the fastest-growing major economy. Moody’s Analytics expects GDP growth at 7.5% in 2026, compared to 7.8% in 2025, before moderating to around 6.5% in 2027.

Across the Asia-Pacific, economic expansion is projected to ease, reaching 4% in 2026. This is a dip from the 4.3% growth anticipated for 2025, a shift shaped by geopolitical strains and climbing energy costs.

Currency & Inflation Trends

The value of the Indian Rupee has declined by 2% against the U.S. dollar has strengthened since the conflict began, according to a Reuters report. The weakening of the Rupee, coupled with rising crude oil prices, may exert upward pressure on imported inflation.

Moody’s Analytics indicated that inflation is expected to remain close to the Reserve Bank of India’s 4% target, although risks remain elevated if commodity prices continue to rise.

Structural Vulnerabilities

The report also pointed out that India has low energy buffers in comparison to other developed Asian economies, which rely more on their strategic reserves. This makes India more vulnerable to sustained disruptions in global energy markets.

While such measures by the government may bring some solace in the form of relief to the economy, sustained volatility in crude prices may continue to affect the growth momentum.

The results also point to the economic risks that could befall India if the geopolitical tensions in the Middle East persist at their current levels.