Middle East Tensions: The ongoing conflict in West Asia has now been going on for almost two weeks, but the situation still does not seem to be normalizing. Neither has Iran shown any signs of an agreement, nor have any concrete signs of de-escalation emerged from the United States or Israel.
Meanwhile, oil prices are again showing an upward trend in the global market. Some time ago, the price of Crude Oil had reached approximately $120 per barrel, and currently, it is trading above $100 per barrel.
The impact of escalating tensions in West Asia is clearly visible in India as well. The rising oil prices and global uncertainty are affecting the country’s economy as well as the daily lives of common people. In such a situation, it has become important to understand what kind of effects this conflict is having on India.
1- Increasing Gas Shortage
The ongoing conflict in West Asia is also impacting global energy supply. Especially, the routes for oil and gas passing through the Strait of Hormuz have been affected, leading to increased pressure on supply. Since India imports about 80 percent of its energy needs, this situation is having a direct impact on the country.
Its impact is being felt across several industries. Businesses like fertilizer plants, tile factories, and restaurants are struggling with gas shortages. The National Restaurant Association of India (NRAI) has advised its members to limit menus, use more electricity-powered equipment instead of gas, and reduce working hours if necessary.
2- Impact on Funeral Arrangements
The impact of LPG shortage has now reached cremation grounds. In many cities, gas-fired crematoriums have had to be shut down due to insufficient fuel. In such a situation, traditional wood is being used for funerals, which has also increased additional pressure on arrangements.
3- Expensive Airfares
The impact of rising jet fuel prices is now visible in the aviation sector as well. Expensive fuel has increased the operating costs for airlines. Additionally, insurance premiums for flights operating on Middle East routes have also increased. According to reports, due to the war-like situation, over 46,000 flights have been canceled worldwide, leading to a sharp increase in international airfares.
4- Decline in Gold and Silver Prices
Typically, during global tensions, investors turn to gold as a safe haven, causing its prices to rise. However, this time the situation appears slightly different. Rapid increases in oil prices are likely to fuel inflation, making it difficult for the Federal Reserve to cut interest rates soon.
Strong dollar continues to put pressure on gold prices. Meanwhile, according to a report by Goldman Sachs, interest rate cuts are now less likely to happen before September, which could also impact the gold and silver markets.
5- Impact on Economic Growth
India has set a target to become a developed nation by 2047. To achieve this goal, the country is considered to need to maintain an annual GDP growth rate of approximately 8 to 11 percent. However, escalating global tensions and a surge in energy prices could make this path difficult.
If Crude Oil prices remain around $100 per barrel, it could impact India’s economic pace. Experts estimate that high oil prices could lead to a decrease of approximately 0.60 percent, or about 60 basis points, in the country’s GDP growth rate.
Thus, rising energy costs could increase pressure on industries and the transport sector, ultimately affecting economic activities and the pace of development.
