Into its fifth week, the ongoing military conflict in the Persian Gulf region does not show any clear sign of abating. Statements from players in the war drama are confusing rather than clarifying. As of today, no one knows when the military action would decisively end and on what terms, despite talks of de-escalation.

It is clear that the damage inflicted by the ongoing conflict is sure to impact the global energy market in the months ahead and in turn, global growth prospects. To be sure, early this year, the world crude oil market was projected to be in a state of surplus for 2026. No wonder, Brent crude was hovering around the low 60s ($ per barrel).

Crude: Things have dramatically changed in March 2026. In the epicenter of the world’s energy supplies – the Middle East - production outages are real, damage to energy facilities and storage infrastructure is real and virtual closure of the strategic Strait of Hormuz is real. This has caused supply chain disruption of massive proportion.

Through the Strait of Hormuz passes 20 million barrels a day of crude oil (a fifth of global production) and massive quantities of natural gas, most of it destined for Asia

Pacific nations including India. More than half of the cargo is now rerouted entailing longer voyage time, higher ocean freight, elevated insurance premium and significant delivery delays.

Brent is currently around $ 115 a barrel with potential upside risk, should the war linger longer. Will the Strait of Hormuz open in April even if partially? Will energy transit improve in Q2? No answer as of now. Worse, one cannot wish away the risk of a more severe and potentially longer lasting supply disruption. 

As a nation dependent on imported crude oil to the extent of over 85% of its consumption requirement India will have to pay a heavy price. Come May, the government is sure to sharply hike petrol and gas prices. This will have a cascading effect on the economy as crude oil is a ‘universal intermediate’ and its price impact will be across the board. Simply put, brace for energy inflation.

Crops: The 2025-26 Rabi season harvest is has started. Wheat, pulses (mainly

chana / chickpea) and oilseeds (mainly rapeseed/mustard) are the key crops. The government’s production estimate released on February 11 is widely believed to have overstated wheat and mustard production by at least 10%. Heat wave and moisture stress have affected yields. 

The government has admitted that the estimated numbers are tentative and would be revised after conducting crop-cutting experiments. More often than not, the production estimates are revised downward.

More critical than the size of the Rabi harvest is the fate of the upcoming Kharif

2026-27 planting and production. Major crops of the season include rice, coarse cereals, pulses, oilseeds, cotton and sugarcane.

There is high risk of El Nino, a weather phenomenon that reduces precipitation and inflicts dry conditions, in the second half of 2026 that coincides with Kharif planting (June-July) and harvest (September-October). India’s agriculture is still substantially dependent on the temporal and spatial distribution of the southwest monsoon. A bad monsoon can set our economy back.

Natural gas is the feedstock for synthetic fertilizers like urea where our import dependence is high. Cost of imported fertilizers is skyrocketing following disruption to natural gas supplies from the Middle East. Rising input costs will push output prices higher, even as a bad monsoon can reduce harvest size, exacerbate the price risk and result in food inflation.

Currency: This third C is already in a weakening trend, having recently fallen to an all-time low of 94 to a US dollar. Widening trade deficit due heavy imports and outflow of foreign capital have caused the Rupee to weaken. A weak rupee raises the landed-cost of imported goods. No signs on the horizon that the rupee will reverse the downtrend anytime soon.

In other words, we are importing inflation with our unmitigated import of energy products, precious metals (gold and silver), vegetable oils, pulses, fertilizers and many more goods. 

The coming months are going to be hugely challenging especially for the common citizens. Inflation hurts the poor the most; and in our country, their number is uncomfortably large.

New Delhi must take cognizance of the looming risks and work on contingency plans to mitigate the inflation risk. Desperate situations usually lead to desperate policy interventions; and that can shake business confidence.