“The uncertainties have impacted global crude oil markets, with Brent hovering in the range of $73-76 per barrel (bbl) over the past week—up from an average of $65 per bbl during April-May 2025. While this is still lower than the fiscal 2025 average of $78 per bbl, any escalation of tensions, say through disruption of energy supply chains, could result in a further spike in oil prices.“If crude oil prices continue to be elevated over longer periods, it could impact India Inc’s profits,” said Crisil. “Also, prolonged and increasing uncertainties can result in a rise in air/sea freight cost and insurance premiums for export/import-based sectors, so will bear watching.”In the face of these developments, the Reserve Bank of India has adopted a cautious approach. It has intervened in currency markets via limited dollar sales to curb rupee volatility, but is also wary of depleting reserves. Simultaneously, rising bond yields reflect growing fears over inflation and a potential uptick in government borrowing.From a macroeconomic standpoint, the dual challenge of elevated crude prices and a sliding rupee threatens to widen the current account deficit, increase financing costs, and strain fiscal balances. These pressures, if prolonged, could further complicate monetary and fiscal policy choices.Much hinges on the West Asia conflict. A diplomatic breakthrough could ease tensions in energy markets and help stabilise rupee. Conversely, if hostilities escalate, India may confront a far more turbulent foreign exchange scenario in the second half of 2025.At present, volatility remains a defining feature of the landscape—highlighting the persistent vulnerability of domestic economic stability to global geopolitical fault lines.
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