Iran-Israel Crisis: How Petrol, Groceries Will Burn A Hole In Indian Pockets?

Iran-Israel conflict 2025 drived oil prices up, threatening higher fuel, food costs in India.

Smoke billows following a missile attack from Iran, in Tel Aviv (ANI)

The heightening Iran-Israel conflict is likely to put pressure on Indian domestic budgets as rising global crude oil prices, fueled by Middle East tensions, ripple through the economy. As India imports more than 85% of its crude oil, the effect of the conflict on fuel, transport, and grocery bills may come as a rude shock to the common man, experts caution.

Global crude prices surged 13% on Friday, the biggest single-day increase since the Russian invasion of Ukraine in 2022, as tensions ran high. Prices dipped by $1 per barrel on Monday after news that Iran wanted to de-escalate but the uncertainty remains. Increased crude prices are likely to push petrol, diesel, LPG, and kerosene prices higher, which will raise costs for car owners, commuters, and families that depend on cooking gas.

The ripple effect goes beyond fuel pumps. Higher diesel prices will increase transport costs, leading to higher prices for produce like fruits, grains, and other items that are transported by road. A persistent $10 per barrel oil price increase may add 0.4 percentage points to India's consumer price index (CPI) inflation, swelling grocery bills and pinching budgets.

Disruptions to trade in crucial sea routes like the Strait of Hormuz and Red Sea may further increase freight and insurance prices, increasing the cost of imported electronics and chemicals. An increased oil import bill can depreciate the Indian rupee, pushing up the cost of all imports and spurring inflation.

Industry segments such as agriculture incur increased diesel prices for tractors and irrigation, which would inflate food prices. Petroleum derivative-based industries such as paints, chemicals, tires, and plastics would also transfer higher input prices to consumers. India has not imported Iranian oil since mid-2019 because of U.S. sanctions, but volatility in Iran's supply to China indirectly impacts India as Beijing competes for alternative supplies.

The Iran-Israel conflict, while far off, has the potential to increase the cost of daily living in India, from fuel to food, as the country prepares for economic loss.