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Oil shock could widen India deficit and lift inflation as US Iran war drags on expert warns
Economy
Published on 16 May 2026
Each USD 10 oil jump may drain 0.3% GDP
As the US-Iran conflict shows no signs of ending, former UN Economic Advisor Santosh Mehrotra warns India faces a fresh oil-driven spiral. He says every USD 10 rise in global oil can widen India’s current account deficit by about 0.3% of GDP and similarly lift CPI. With GDP and CPI revisions already reflecting the “current situation,” he fears prolonged war effects. He points to Strait of Hormuz disruptions, tighter LPG supply hurting restaurants and ceramics, and a diesel hike that could further spread inflation to consumers.
- Current account deficit may widen by 0.3% of GDP per USD 10 oil rise
- Inflation impact may mirror the same USD 10 oil move into CPI
- Strait of Hormuz closure could disrupt oil, gas, fertiliser, and helium supplies
- Industrial LPG shortages have reduced restaurant jobs due to insufficient availability
- Rupee has weakened from under 90 to about 95-96 per dollar in three months
Read the full story at The Economic Times
This summarization was done by Beige for a story published on 
The Economic Times