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The Oil Shock Is Weakening India's Economy and Finances
By Tsvetana Paraskova of OilPrice.com
India is scrambling to contain the economic and financial impact of the worst oil supply disruption in history as analysts say the high oil prices would continue to weigh on the Indian currency, economic growth, and public finances as long as supply is choked at the Strait of Hormuz.
More than three months after the Iran war began, investment banks, brokerages, rating agencies, and even India’s central bank are lowering economic growth forecasts, while the government intervenes to stop the cash bleed from the balance of payments that has surged with the oil prices.
India, which imports more than 85% of the oil it consumes, received about half of all its imports from the Middle East before the war. Now, state-owned and private refiners are looking to diversify imports, including by taking in record volumes of Russian oil, and turning to Venezuela and Brazil for additional crude to offset the lost Middle Eastern supply.
Yet, the high import prices, with oil up by about $30 per barrel compared to pre-war levels, are weighing on India’s economic prospects and public finances.
“India is set for a series of supply shocks,” Michael Langham, emerging markets economist at Aberdeen Investments, told Reuters.
India on Friday introduced measures to protect its currency, the rupee, which had plunged to an all-time low versus the U.S. dollar amid the energy crisis.
Yet, the world’s third-biggest crude importer has seen its growth prospects diminished as its high import dependence and the high price refiners pay weigh on inflation and GDP growth.
India’s economy remains resilient to the external shocks, but the oil price surge poses near-term downside risks to economic growth and upside risks to inflation, the Reserve Bank of India (RBI) said at the end of May.
Indian wealth and asset manager 360 ONE Capital last week said that India’s inflation is set to accelerate to 4.8% in the fiscal year 2027, if oil prices average $90 per barrel through March next year.
“A further $10/bbl increase in crude prices above our base assumption could push inflation to 5.6 per cent (assuming a partial pass-through of around 5 per cent to retail fuel prices), lower GDP growth by an additional 40 bps to 5.9 per cent, widen the current account deficit to 2.5 per cent GDP, and increase the fiscal deficit to 4.8 per cent of GDP,” analysts at 360 ONE Capital wrote in a report.
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Iran Threatens "Decisive Response" After US Begins 'Self-Defense' Strikes Following Downing Of Apache Helicopter
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US begins 'self defense' strikes against Iran
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Iran threatens retaliation after US retaliatory strikes
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Trump says 'US must respond' after Iran downed Apache over Strait
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Trump says Washington and Tehran are in the "final throes" of cementing a deal, "two or three days"
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Iran shoots down US Apache helicopter over Strait, crew safe
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Despite Trump calls for Israeli ceasefire, casualties are rising in southern Lebanon
So much for the early hopes of an imminent deal...
US Begins "Self Defense" Strikes Against Iran, Iran Threatens Re-RetaliationJust as President Trump has warned, US Central Command has just tweeted confirmation that the US military began 'self defense' strikes against Iran:
"U.S. Central Command (CENTCOM) forces began launching self-defense strikes against Iran at 5 p.m. ET today at the Commander in Chief’s direction, in response to yesterday’s downing of a U.S. Army Apache helicopter.
The mission is a proportional response to unjustified Iranian aggression."
The extent of the latest strikes wasn’t immediately clear but they further undercut an already fragile ceasefire signed in April.
A US official tells Fox that airstrikes targeting Iran are "ongoing" and targets include air defenses and radar installations.
IRNA reports explosions in Iran's Hormozgan province, while IRIB reports aerial attacks in Qeshm, Sirik and Bandar Abbas with six explosions reported in Qeshm
The US and Iran have traded attacks several times in recent days even as Trump has said they are close to signing an agreement to bring the conflict to an end.
President Trump told ABC News Jonathan Karl:
"I think it's very important to respond. They shot down a helicopter, and we are responding as we speak."
He added:
"This is a response to what they did they did with our helicopter last night, and I believe the response should be very strong, very powerful, and that's what this one is."
Shortly after the strikes began, IRGC-owned Tasnim News reported that Iran is threatening to retaliate for US' retaliation:
"Iran will respond to US aggression.
As warned hours earlier, Iran will deliver a decisive response to the US aggression, which is being carried out under the pretext of an Apache helicopter crash."
Odds of a peace deal are sliding and oil prices are rising (though not significantly).
Trump Reacts to Apache Downing, Threatens ResponseFollowing earlier reports that a US AH-64 Apache helicopter had gone down over the Strait of Hormuz off the coast of Oman in an unprecedented first of the Iran war, moments ago Trump said on Truth Social that he had "been informed by our Great Military that last night the Iranians shot down one of our highly sophisticated Apache Helicopters while patrolling over the Strait of Hormuz. There were two pilots involved, both are safe and uninjured. Nevertheless, the United States must, of necessity, respond to this attack."
The news that the US may imminently resume the Iran war - sent oil surging instantly...
... as Trump's latest promise that a huge peace is coming appears to have unraveled yet again.
Trump Says In 'Final Throes' of Iran Deal... AgainPresident Trump is still maintaining that Washington and Tehran are in the "final throes" of cementing a deal, and is even suggesting (once again) that an agreement will be done in days:
Asked whether it would be matter of days or weeks, he said it would take “two or three days”.
Tehran has repeatedly stated any deal should include Lebanon—where Israel has been pressing its war with Iran-backed Hezbollah—and fired missiles at Israel on Sunday. That prompted Israeli retaliation, despite US pressure for restraint.
Iran fired another salvo before announcing it was ceasing military action, and hours later Israeli Prime Minister Benjamin Netanyahu announced that the “fire on that front is contained”.
Of course, we've been hearing that the war is merely 'days' away from ending from basically the start of the war. And yet, all too predictably, the two sides keep going up the escalation ladder in an escalation trap.
But the White House is saying that it will forge a deal which is good for the American people, whether Israel likes it or not. "Israel may like that, they may not like that — but this is in the best interest of the United States," Vice President JD Vance spelled out to Fox this week.
US Apache Helicopter Shot Down over Strait, Crew SafeA US helicopter has gone down over the Strait of Hormuz off the coast of Oman in an unprecedented first of the Iran war, Central Command announced Tuesday, after which the two crew members were reportedly rescued by unmanned boats.
The Army AH-64 Apache was patrolling regional waters before the downing incident, which is still shrouded in mystery, and which the Pentagon says it is now investigating. However, the Iranians are saying they know exactly what happened - insisting that the Apache was shot down.
"An AH-64 Apache attack helicopter belonging to the U.S. Army was shot down and destroyed by the IRGC Navy near the Strait of Hormuz, after ignoring warnings and being targeted by fired from one of our speedboats," an Iranian military central command statement has said.
The NY Times, among the first to report the downing, underscores the claims and counter-claims concerning what happened:
It was not immediately clear whether the Apache was shot down by Iranian fire, experienced mechanical failure or encountered some other problem, said a person briefed on the incident, who spoke on the condition of anonymity. Central Command said in a statement that the incident was under investigation.
But the Pentagon says the crew was successfully rescued. The unusual rescue by unmanned boats adds another layer of complexity and strangeness to the story.
"A Task Force 59 unmanned surface vessel, essentially a drone boat, found and rescued the soldiers," spokesperson Capt. Tim Hawkins described to NBC News. The pair of pilots are now receiving medical care, he indicated, after their rescue came within two hours of the aircraft going down.
Trump briefly spoke to journalists at John F. Kennedy International Airport in New York after watching the NBA Finals on Monday night and he acknowledged the rare crash in the Persian Gulf.
"The pilots are fine. Yeah," Trump said. "Nobody injured. We are going to issue a report tomorrow. But the pilots are fine."
Apaches, along with A-10 gunships, have been frequently used for low-flying operations in the Persian Gulf and Hormuz region, in order to attack Iranian small boast.
As for the Iranian claims of shootdown, it remains a top most plausible scenario, but the Pentagon has not said whether it took on Iranian fire.
FOX: American military forces, including U.S. Naval Forces Central Command, the 82nd Airborne Division, and U.S. 5th Fleet assets, helped bring both soldiers to safety.
NEW: Two U.S. soldiers are safe after a dramatic rescue operation off the coast of Oman.
CENTCOM says the crew members were recovered roughly two hours after their AH-64 Apache helicopter went down while patrolling regional waters.
American military forces, including U.S. Naval… pic.twitter.com/iBr7WiQnKB
During earlier operations connected to Epic Fury, other US military aerial assets have crashed or sustained damage over the region - however, the Pentagon has downplayed or rejected efforts to link a number of incidents to Iranian attack, apparently not wishing to give Tehran a battlefield 'success' acknowledgement.
But many independent pundits have suspected that all along the Iranians have been hitting a lot more American assets than previously disclosed.
Death Toll Soars As Israel Pounds South LebanonThe southern Lebanese city of Tyre is being pounded by Israeli airstrikes on Tuesday, despite President Trump's insistence that Lebanon not come under attack. Israel's military had hours prior issued an evacuation order for all civilians in the area, amid the unraveling and failing ceasefire.
Casualties are already high, coming at a tense moment after starting on Sunday Iran sent ballistic missiles against Israel over its renewed airstrikes on the southern suburbs of Beirut, where it says Hezbollah command centers are located.
The NY Times reports of the growing death toll Tuesday, "At least eight people were killed in the bombardment, and dozens more were wounded, Lebanon’s health ministry said. The Israeli military also targeted towns and villages across southern Lebanon, including areas that were not covered by evacuation warnings, according to the country’s state-run news agency."
Attack on Tyre, via AFPSo clearly the air raids are expanding, per the report, even after the latest Trump warnings directed at Netanyahu to not do anything that would sabotage a broader Iran peace agreement.
Tyler Durden Tue, 06/09/2026 - 17:25