The prolonged conflict in West Asia is beginning to translate into a significant downside risk for the Indian economy, disrupting trade flows, raising import costs, and adding pressure across multiple macroeconomic indicators, according to a report by Crisil Intelligence.
The report said the unresolved conflict, now stretching beyond two months, has started creating visible economic strain. “The downside risks to the economy have begun materializing with over two months of unresolved West Asia conflict,” the report said.
Crisil Intelligence added that the closure of the Strait of Hormuz has triggered an unprecedented energy shock, with the impact likely to persist even after trade routes reopen due to damage to oil and gas infrastructure in the region.
“The closure of Strait of Hormuz has created the largest energy shock on record. This will take time to normalise because of the damage to oil and gas infrastructure in West Asia, even after the route reopens,” the report noted.
India’s import-dependent manufacturing sector is expected to face the sharpest impact as higher energy, gas, and fertiliser costs push up production expenses. At the same time, weaker global demand and disruptions in international trade are expected to weigh on exports.
Reflecting these pressures, Crisil Intelligence has projected India’s real GDP growth to slow to 6.6 percent in fiscal 2027, compared with 7.6 percent in fiscal 2026. The current account deficit is also expected to widen sharply to 2.2 percent of GDP in fiscal 2027 from an estimated 0.8 percent in the previous financial year.
“The spike in international crude, gas and fertilizer prices is expected to raise import bill significantly while exports are expected to be hit from a global trade disruption and weakening global demand. Remittances face a risk from continuing tensions in West Asia, which accounts for ~38% of remittances to India,” the report said.
Inflationary pressures are also expected to intensify. Average consumer price inflation is projected to rise to 5.1 percent in fiscal 2027, up from 2.0 percent in fiscal 2026.
According to the report, although retail fuel prices have so far remained relatively contained, a prolonged rise in global commodity prices could eventually lead to higher fuel costs for households and transport. The report added that rising energy prices, logistics costs, and broader input inflation are likely to be passed on by producers, putting upward pressure on core inflation.
Crisil Intelligence has also revised its Brent crude oil forecast upward for fiscal 2027, now expecting prices in the range of USD 90 to USD 95 per barrel, compared with its earlier estimate of USD 82 to USD 87 per barrel.
Beyond oil, the report said the disruption is affecting freight costs, insurance premiums, supply chains, and fertiliser prices, creating broader economic stress across sectors.
