Oil could hit $150-$200 per barrel if Iran war drags on: Raghuram Rajan

Former RBI Governor Raghuram Rajan warns that if the US-Israeli war against Iran continues beyond a month, oil prices could surge to $150-200 per barrel, potentially triggering a global recession. Speaking on India Today TV, Rajan highlighted that 15-20 percent of world energy sources are already shut in, and prolonged conflict would require ‘tremendous demand destruction.’ He noted India’s vulnerability, with 50 percent of crude oil imports and 85 percent of LPG supplies exposed through the Strait of Hormuz. Rajan cautioned that a $10 increase in oil prices adds approximately $17 billion to India’s current account deficit, roughly 0.5 percent of GDP. He emphasised that while India’s one lakh crore economic stabilisation fund can provide short-term relief, the government lacks fiscal room for prolonged subsidies and must allow price adjustments to reach consumers and producers. Rajan also stressed the need for strategic resilience planning, including building petroleum reserves and diversifying supply chains for critical inputs like pharmaceutical APIs and semiconductor chips.

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