Will Middle East tensions quietly slow India’s growth in 2026?

Middle East tensions will almost surely affect the Indian economy because India depends heavily on this region for crude oil, gas and LPG. Nearly 85 to 90 percent of India’s crude needs are imported and the Middle East plus Russia supply around 80 percent of this basket, so any disruption quickly hits costs and stability.

Higher energy prices are the first and sharpest channel. When conflict pushes up crude and LNG prices, India’s import bill rises, the trade and current account deficits widen and inflation picks up, since fuel, freight and commodity costs feed into everything from vegetables to air tickets. Analysts estimate that every 10 dollar per barrel rise in crude can raise inflation and the current account deficit noticeably and prolonged war could shave up to 4 percent off India’s output compared with earlier growth paths.

The second channel is through trade, remittances and the rupee. A large share of India’s non energy imports and exports flows through the region, and key sea routes like the Strait of Hormuz are vital for shipping. At the same time, about 38 percent of India’s remittances, over 50 billion dollars a year, come from Gulf countries and these remittances help finance a big part of India’s trade deficit, so job losses or instability there can weaken the rupee and reduce household incomes back home.