West Asia Crisis Could Raise Energy Risks for India

New Delhi, March 6: Rising geopolitical tensions in West Asia, particularly around Iran and the strategic Strait of Hormuz, could create short-term risks for global energy markets and oil-importing countries like India, according to a new report by Jefferies.

However, the report also noted that India’s strong domestic economic momentum and stable investment flows could help the country remain resilient despite global uncertainty.

Energy Prices Surge After West Asia Tensions

Global energy markets reacted sharply after the escalation of tensions in the region.

According to the report, Brent crude prices increased by nearly 13 percent, while European natural gas prices surged by 55 percent within a week.

The spike in energy prices was mainly driven by fears that conflict could disrupt oil shipments through the Strait of Hormuz, one of the most important global oil trade routes.

If the route were blocked or disrupted, global oil supplies could be severely affected. This situation would particularly impact countries like India that depend heavily on imported crude oil.

India Faces Risk Due to Heavy Oil Imports

India imports more than 80 percent of its crude oil requirements, which makes the country vulnerable to sudden increases in global oil prices.

According to the report, rising crude oil prices can impact India through several channels:

Higher inflation and fuel costs
Increased current account deficit
Greater fiscal pressure due to fuel subsidies

These factors could temporarily slow economic momentum if oil prices remain high for a long period.

Investors Treat Geopolitical Shocks as Temporary

Despite the sudden rise in energy prices, financial markets have reacted cautiously.

Jefferies noted that many investors now treat geopolitical shocks as short-term disruptions rather than long-term threats. As a result, markets often see such events as buying opportunities.

However, the report warned that prolonged conflict in West Asia could increase volatility in global energy markets, which may affect emerging economies.

Foreign Investors Reduce Exposure to Indian Equities

The report also highlighted recent trends in foreign investment.

Foreign investors have sold USD 32.7 billion worth of Indian equities since October 2024. However, there was a small improvement in February 2026 when investors made a net purchase of USD 1.7 billion.

According to Jefferies, global investors may increase exposure to India once the semiconductor and artificial intelligence investment cycle slows in markets like Taiwan and South Korea.

At that point, capital could rotate back toward India.

Domestic Investment Flows Support Indian Markets

Even though foreign investors reduced their holdings, strong domestic investment flows continue to support India’s equity markets.

Systematic Investment Plan (Systematic Investment Plan or SIP) contributions averaged around ₹305 billion per month over the three months ending January 2026.

In addition, the government-backed National Pension System contributes roughly USD 1.4 billion each month to equity markets.

These consistent domestic investments have helped stabilise the stock market despite foreign outflows.

Signs of Strong Economic Growth in India

The report also pointed to encouraging indicators of economic growth in India.

One of the strongest signals is loan growth, which increased to 13.6 percent year-on-year as of February 15. This is a significant improvement from 9 percent growth recorded in May 2025.

Corporate performance has also strengthened. Companies tracked by Jefferies recorded 18 percent earnings growth in the December quarter, marking the fastest pace in eight quarters.