West Asia war hits Indian economy as rupee breaches 93, oil spikes

New Delhi: India’s economy is facing fresh stress from the widening conflict in West Asia, with the rupee breaching 93 against the U.S. dollar, bond yields rising sharply and inflation concerns deepening as crude oil prices stay elevated.

Reuters reported that the rupee has weakened about 3% since the conflict began on February 28 and slipped past 93 per dollar, marking its steepest weekly decline in more than three years. In a separate report, Reuters said the currency fell past 93 for the first time and briefly neared 94, logging its worst single-day drop in over four years as traders reacted to higher oil prices, shipping disruptions and foreign outflows.

The pressure is being driven largely by a sharp jump in crude prices. Reuters said oil surged to around $112 a barrel in recent sessions, up roughly 50% this month, before easing after U.S. President Donald Trump delayed a planned strike on Iran’s power grid. Even after that pullback, Brent crude remained near $100 a barrel and U.S. crude above $90, keeping imported inflation risks high for India.

India remains highly vulnerable because it imports most of its crude and depends heavily on Gulf shipping lanes. Reuters reported that Prime Minister Narendra Modi told Parliament around 40% of India’s crude imports normally pass through the Strait of Hormuz, where tensions have raised fears of prolonged disruption.

Reuters also reported that two tankers bound for India managed to pass through Hormuz on Monday, but many vessels remained delayed or stranded, underlining the fragility of energy flows.

The stress has spilled into the bond market. Reuters said India’s 10-year benchmark government bond yield rose to 6.7369%, its biggest weekly jump in about three months. Another Reuters report said the 10-year yield surged 15 basis points in a single session, the sharpest rise in more than a year, as markets reassessed inflation and rate risks.

The Reserve Bank of India has intervened heavily to limit the damage, but traders increasingly believe it is allowing more market adjustment. Reuters reported that the RBI bought 767 billion rupees worth of bonds over two weeks and spent an estimated $16 billion to $18 billion this month defending the rupee. Foreign exchange reserves fell by more than $19 billion to $709.76 billion as of March 13.

Markets are now pricing in a tougher policy outlook if oil remains elevated. Reuters reported that analysts see a higher risk of delayed easing, while Goldman Sachs has cut India’s 2026 growth forecast and warned the RBI may need to consider up to a 50-basis-point rate hike if rupee weakness and imported inflation worsen.

Indian equities briefly rebounded after Trump delayed the Iran strike. Reuters reported that the Nifty 50 rose 1.78% to 22,912.40 and the BSE Sensex gained 1.89% to 74,068.45, with all major sectors advancing. But Reuters also noted that Indian shares were still down about 9% in March, reflecting the broader hit from high oil prices, foreign outflows and energy security concerns.

The economic strain is also extending beyond markets. Reuters reported that India is preparing for a severe summer with electricity demand expected to hit a record 270 gigawatts. The government has ordered coal-fired plants to run at full capacity and defer maintenance to avoid blackouts. Coal still accounts for about 75% of India’s electricity generation, and India currently has reserves for roughly 88 days.

Modi sought to reassure Parliament, saying India’s economic fundamentals remain strong and that the country has ample coal and petrol supplies. Reuters reported that India has petroleum reserves of more than 5.3 million metric tons, with another 6.5 million metric tons under development.

The conflict is also disrupting supply chains. Reuters reported that India’s beer industry is facing shortages and cost pressure as the war affects natural gas supplies and delays aluminium imports. The Brewers Association of India said glass bottle prices have risen 20%, while costs of cartons, labels and other packaging inputs have sharply increased. Brewers are now warning of possible price hikes of 12% to 15%, subject to state approvals.

The broader risk for India is that high crude prices, shipping disruptions and supply bottlenecks could push up transport, energy and consumer costs at a time when growth is already showing signs of slowing.

As of the latest verified reporting, the pressure points are clear: the rupee has breached 93, bond yields have jumped, oil remains elevated, and inflation risks are rising as India absorbs the economic fallout of the West Asia conflict.