--- title: "India races to shield economy from Iran war-driven oil shock, capital stress" type: "News" locale: "en" url: "https://longbridge.com/en/news/286238915.md" description: "India is facing economic challenges due to a spike in energy prices caused by the Iran war, leading to crisis measures from policymakers. The conflict has disrupted global energy supplies, making imports more expensive and deterring foreign investment. Economists have downgraded growth forecasts and raised inflation projections, predicting a current account deficit of 2.5% of GDP for the fiscal year ending March 2027. The rupee has fallen over 5%, and foreign investors have withdrawn more than $20 billion from Indian equities since the war began. Policymakers are urging consumption cuts and have increased tariffs on precious metal imports to stabilize the economy." datetime: "2026-05-13T09:47:55.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/286238915.md) - [en](https://longbridge.com/en/news/286238915.md) - [zh-HK](https://longbridge.com/zh-HK/news/286238915.md) --- # India races to shield economy from Iran war-driven oil shock, capital stress By Jaspreet Kalra and Nimesh Vora MUMBAI, May 13 (Reuters) - A sustained spike in energy prices triggered by the Iran war has clouded India's macroeconomic outlook, spurring crisis-era measures from policymakers to ‌shield Asia's third-largest economy from external headwinds. The most severe disruption of global energy supplies in history, ‌which began in late February, is stressing India's external sector by making imports significantly more expensive while keeping overseas investors away from ​local assets. Economists have marked down growth forecasts for the economy, lifted inflation projections and are forecasting persistent pressure on the rupee with India staring down the barrel of a third consecutive year of a balance of payments deficit. India’s heavy reliance on oil imports leaves the currency particularly vulnerable among emerging markets if the Iran crisis drags on. ‌The country imports about 90% of ⁠its oil needs and about 50% of its gas requirements. Managing the current account credibly, financing it, and preventing further currency depreciation are big imperatives for India this year ⁠amid the Gulf crisis, Chief Economic Advisor V. Anantha Nageswaran said on Tuesday. The energy shock from the U.S.-Iran conflict is forecast to widen India’s current account deficit to 2.5% of GDP in the fiscal year ending in March 2027 ​from ​0.9% in the previous year. On top of the threat to ​India's current account, a record pace of ‌foreign portfolio outflows is stressing the capital account. Foreign investors have pulled out more than $20 billion from Indian equities since the war began, with year-to-date outflows exceeding last year's record. Reflecting the two-sided strain, the rupee has already fallen more than 5% since the Iran war broke out to hit a record low this week, and is the worst-performing Asian currency so far in 2026. Looking to manage the strain, policymakers have turned their attention ‌to crisis-era measures including exhorting citizens to cut down on ​consumption that uses up foreign exchange. Indian Prime Minister Narendra Modi ​on Sunday urged a range of measures to ​conserve foreign exchange reserves while late on Tuesday night the central government hiked tariffs ‌on precious metal imports as a way to ​curb demand and cushion the ​rupee. The central bank for its part has sold down dollars from its FX reserves and tapped rare regulatory measures to support the currency. The stress on the external sector carries echoes of past ​episodes such as the Russia-Ukraine war ‌in 2022, but comes at a relatively better starting point for the Indian economy. Before the ​war broke out, inflation was very subdued while growth was on a strong footing. (Reporting by ​Jaspreet Kalra and Nimesh Vora; Editing by Lincoln Feast.) ### Related Stocks - [PIN.US](https://longbridge.com/en/quote/PIN.US.md) - [INDY.US](https://longbridge.com/en/quote/INDY.US.md) - [CRAK.US](https://longbridge.com/en/quote/CRAK.US.md) - [XES.US](https://longbridge.com/en/quote/XES.US.md) - [IEO.US](https://longbridge.com/en/quote/IEO.US.md) - [EPI.US](https://longbridge.com/en/quote/EPI.US.md) - [UCO.US](https://longbridge.com/en/quote/UCO.US.md) - [XOP.US](https://longbridge.com/en/quote/XOP.US.md) - [INDA.US](https://longbridge.com/en/quote/INDA.US.md) - [OIH.US](https://longbridge.com/en/quote/OIH.US.md) ## Related News & Research - [Record oil draw from US emergency reserve drives total volumes to two-year low](https://longbridge.com/en/news/286821970.md) - [OPEC lowers 2026 global oil demand growth forecast](https://longbridge.com/en/news/286256123.md) - [Federal probes eye $1.7B oil trade before Iran war news](https://longbridge.com/en/news/286150222.md) - [LIVE MARKETS-One billion barrels lost, but it could have been worse](https://longbridge.com/en/news/286239314.md) - [Citi bull case Brent hitting $150 near term as oil markets under-price disruption risk](https://longbridge.com/en/news/286992430.md)