Oil price surge threatens global growth, inflation and India’s economy

The fragile stability in global oil markets is coming under renewed pressure after Brent crude breached the $107-per-barrel mark, with disruptions to Saudi Arabia’s infrastructure and escalating US-Iran tensions affecting key shipping corridors in West Asia.

Geopolitical analyst Prof. Gulshan Sachdeva of Jawaharlal Nehru University’s School of International Studies and Peter McGuire, CEO of Trading.com Australia, discussed the risks to global inflation, central bank policy and India’s economic growth in an interview with NDTV Profit on Monday.

The latest surge follows attacks affecting Saudi Arabia’s pipeline operations and growing disruption risks around the Bab el-Mandeb, Strait of Hormuz and Red Sea.

McGuire said Brent could rise towards $110 and potentially the $110-$115 range if disruptions persist. Brent rose 8% last week, crossing $100 for the first time since July.

Sachdeva said crude had previously remained within an $80-$90 range, but that stability has been disrupted by continuing regional attacks. He said damaged infrastructure could be repaired within weeks or months, but the lack of regional stabilisation remains the bigger concern.

He expects crude to rise by another few dollars before finding a near-term floor around $90-$100. A return to $70-$80 levels, he said, could take two to three months.

Higher oil prices could also complicate efforts by central banks to control inflation. McGuire warned that the inflation outlook could worsen over the next two months as energy prices remain elevated.

For India, which depends heavily on crude imports, the price surge poses fiscal and inflation risks despite recent 7.8% GDP growth. Sachdeva said every $10 increase in crude prices could result in an additional outflow of at least $2 billion, depending on currency movements.

Prolonged high prices could also pressure state-run oil marketing companies, retail fuel prices and government finances. Sachdeva said the disruption of major oil routes should also prompt India to reconsider long-term energy corridors and strengthen its energy security.