India Can Manage $80 Oil, But Prolonged Hormuz Disruption May Strain Economy: UBS

India can withstand crude oil prices around $80 per barrel, but a prolonged disruption in the Strait of Hormuz could create broader economic challenges, according to a report by UBS. The brokerage raised its near-term forecast for Brent crude to about $80 per barrel for March and expects the 2026 average price to reach $72, up from its earlier estimate of $62. The report noted that Brent had already climbed close to $84 amid escalating tensions in the Middle East and concerns about restricted flows through the key oil transit route.

UBS warned that India remains highly exposed to global oil shocks because it imports more than 85% of its crude needs, with more than half coming from West Asia and a significant portion passing through the Strait of Hormuz. The report highlighted that more than 20 million barrels of oil normally move through the route each day, and limited alternative pipeline capacity means any disruption could significantly affect supply. If crude prices rise toward $100 alongside supply constraints, India may need to respond quickly with policy measures, including reconsidering its stance on Russian oil imports to secure energy supply.

The brokerage estimates that every $10 increase in average crude prices could widen India’s current account deficit by about 0.4% of GDP, add roughly 30 basis points to inflation, and shave around 15 basis points off economic growth if the costs are fully passed on to consumers. While inflation could remain manageable if oil stays near $80, higher prices would likely pressure the rupee and expand the trade deficit. UBS also warned that if oil remains elevated near $100, the government may face pressure to increase subsidies or cut fuel taxes, which could strain public finances.

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