Crude Oil Price Hits 4-Month High Above $108 Amid Escalating West Asia Tensions
Crude Oil Price Hits 4-Month High Above $108 Amid Escalating West Asia Tensions
M.U.H
11/09/20269
Brent crude oil prices surged to a four-month high of $108.77 per barrel on Friday as tensions in West Asia escalated further, raising concerns over the impact of higher energy prices on India’s economic growth, inflation and external sector.
At the time of reporting, Brent crude was trading at $107.75 per barrel, after touching a four-month high of $108.77 per barrel.
The situation in West Asia has entered a critical phase, transitioning into a full-scale direct war primarily involving the United States and Iran. The escalation has severely disrupted global energy corridors and triggered regional military mobilisations, putting further pressure on crude oil prices.
Brent crude has surged more than 12 per cent over the past week as the renewed tensions have raised concerns over energy supplies and the stability of key energy corridors.
The latest rise marks a sharp reversal from the cooling seen earlier this year. Crude oil prices last touched similar levels in May, but subsequently declined to below $80 per barrel as hopes of peace emerged and geopolitical tensions eased.
With tensions now escalating again, crude prices have once again moved sharply higher, bringing the impact of elevated oil prices into focus for major oil-importing economies such as India.
Economist Sunil Sinha, former Senior Economist at the National Council of Applied Economic Research (NCAER), said a sustained rise in crude prices could put pressure on India’s economic growth in the coming quarter by increasing inflation, import costs, and risks to the current account.
“With Brent crude oil prices rising above $100 a barrel again amid renewed geopolitical tensions, India’s economic growth could face pressure in the coming quarter, as higher oil prices raise inflation, import costs and risks to the current account," Sinha said in an exclusive conversation with ANI.
Sinha estimated that every $10 increase in international crude oil prices could reduce India’s GDP growth by around 20-30 basis points.
“If oil prices go up by USD 10, then the impact of that increase on GDP would be around, say, 20 basis points to 30 basis points," he said.
The impact is significant for India because higher crude prices increase the country’s import bill and can also put pressure on inflation. Higher input and transportation costs can further affect businesses and consumers, while a larger import bill can put pressure on the current account.
Sinha said that with India’s latest quarterly GDP growth standing at 7.8 per cent, a $10 increase in crude prices could potentially bring down the growth rate.
With Brent crude now above $100 per barrel and having gained more than 12 per cent in just one week, the sustainability of the recent rise in oil prices and the duration of the West Asia conflict will remain key factors for India’s economic outlook.
