The crude oil prices have remained above $90-100 per barrel for over one and a half months now as the conflict in the Middle East has impacted supply following the near-closure of the Strait of Hormuz. This has cast a pall of gloom on global markets, especially India, given the high dependence on crude imports. The Strait accounts for 20% of global and 40% of India’s crude imports transit.
For India, the impact is direct: every $1 rise in crude increases the annual import bill by ~$2 billion, putting pressure on the trade balance. As a result, the have moved from earnings-driven to oil-driven trading in the near term, with fluctuations in the crude dictating market trend.
Take today’s rise, for instance. As prices slipped below $96/barrel, the benchmark indices rejoiced and surged nearly 2%. Though the fall in crude is a positive sign for the stock market bulls, investors must understand that it remains significantly higher than pre-conflict levels. The 9% rebound seen in so far signals that markets are pricing the worst might be out of the way. But a higher for longer crude oil spike could act as a major headwind.
Delayed rate cuts, pressure on the rupee, sustained selling by foreign investors and deteriorating macros are among some of the implications that India faces for sustainably higher oil prices. Since India relies on crude imports to meet 85-90% of its needs, prices above $100 per barrel for the next few months could certainly stoke inflation.
RBI might turn hawkish
In response, the to control rising inflation, which would not be favourable for the Indian equity markets, said Vishnu Kant Upadhyay, AVP, Research – Master Capital Services.
SBI Capital Markets, in a recent note, highlighted that even if a permanent solution is reached to the war in a few weeks, some energy infrastructure in the Gulf has been put out for good, entailing costly and time-consuming repairs, making cheap crude a fond memory. The war also deepens the gash caused by tariffs.
Clearly, the balance of risks is tilting on the upside for prices. Back home, a below-normal monsoon forecast from Skymet and unseasonal rains could impact food production, though healthy production in previous years and fair water reservoir levels act as stabilisers, said SBI Capital Markets, adding that “the door for cutting rates is now shutting, and rates are likely to be on hold”.
Pressure on rupee
Additionally, higher crude oil prices are expected to exert pressure on the Indian rupee.
As India is a major importer of crude, rising prices would lead to an increase in the import bill. This, in turn, would drive higher demand for the US dollar, resulting in depreciation of the rupee, said Upadhyay. So far in 2026, the rupee has declined by over 3% against the US dollar.
Impact on growth
Every US$ 10 rise in oil trim Indian GDP by 30-40 basis points and increases trade deficit by 30-40 basis points, according to Karan Aggarwal, Co-founder & CIO, Ametra PMS.
He added that oil at $100 means FY2027 GDP growth rate ending at 6.3%-6.5% against estimates of 7.2% and CAD ending at 2.2% against estimates of 1%, which would lead to macroeconomic instability in the form of higher borrowings and yields in combination with a weak currency and depleting reserves.
SBI Capital Markets doesn’t expect the benchmark 10-year G-sec yields to come down durably to pre-war levels as broader inflationary pressures have increased since then, while the impact on growth is yet to become alarming.
Earnings and sectoral impact
The implications of inflation and higher input costs due to rising oil prices could also lead to earnings per share cuts, opine analysts. BNP Paribas, in a recent note, said that its optimism about the Indian equities outlook has moderated due to crude shock, prompting it to lower the Nifty 50 target for the year by 11% to 25,500.
History suggests the aftereffects of an oil shock linger for a few quarters even after the prices normalise, as India’s experience in 2008, 2011 and 2022 demonstrates, it said, adding that if oil sustains at $85-90 it could still strain the macro and in turn hurt earnings. The global brokerage has trimmed Nifty 50 EPS growth for 2026 by 5% to 11.6% at ₹1,237.
Among the sectors that could see margin compression include auto, aviation, FMCG, and chemicals, while only upstream energy players could benefit.
While hopes of a , along with the opening of the critical chokepoint at Hormuz, have lifted the Indian stock markets, oil prices are unlikely to bounce back to pre-war levels soon.
Goldman Sachs estimates Brent crude to trade around $90 in the second quarter of 2026. Against this backdrop, analysts see further correction, although a decline to 20,000 would need more headwinds along with just the crude spike.
Currently, the has made a short-term bottom at 22,182. “However, even in a sustained high oil scenario, I expect deeper corrections from current levels. The 24,000-25,000 area will remain a critical resistance zone, limiting upside. I see an 8-10% downside risk, potentially taking the index back toward the 21,000-22,600 zone,” said Santosh Meena, Head of Research at Swastika Investmart.
He added that a move to 20,000 remains a tail risk—plausible only if high oil combines with additional shocks like persistent rupee weakness or global slowdown—but it is not my base case. I view 21,000-22,000 as the more realistic stress target under prolonged $100+ oil, with the recent low acting as initial support, he said.
Harshal Dasani, Business Head at INVasset PMS, believes that from an equity market perspective, even in a higher crude environment, the downside may be limited rather than structural as India’s macro resilience today is far stronger than in previous cycles.
“A fall toward 20,000 would require a combination of sustained crude above $100, sharp FII outflows, and earnings downgrades—an outcome that currently appears low probability.”
However, Aggarwal of Ametra PMS said that if oil persists above US$ 90/barrel beyond April, Nifty@20,000 might be a realistic possibility, he noted.
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