Moody’s predicts India and major oil buyers poised to pursue transit agreements with Iran.

Moody’s Ratings has revised its outlook for global energy supplies and economic growth, particularly concerning oil-importing nations amid ongoing geopolitical tensions. According to their recent report, the closure of the Strait of Hormuz and sustained geopolitical risks have resulted in significant disruptions to oil transit, with an estimated decline of over 90% in maritime traffic through this key chokepoint. Consequently, Moody’s forecasts a slower recovery trajectory for energy supplies, predicting that oil importers such as India, China, Japan, and South Korea will need to negotiate bilateral agreements to secure energy access, rather than experiencing a general reopening of trade routes after the current conflict with Iran.

The implications for the common citizen in India and the broader market are concerning. With around 46% of India’s crude oil imports originating from the Middle East, the persistent disruption in supply could lead to elevated oil prices, expected to remain within the USD 90-110 per barrel range throughout the year. This will likely result in increased costs for consumers and businesses alike, exacerbating inflationary pressures. Moody’s estimates that India’s GDP growth will be reduced by 0.8 percentage points to 6% for the 2026 calendar year, indicating that the economic landscape will be challenging with businesses facing higher production costs and consumers experiencing diminished purchasing power.

Looking towards the long-term outlook, the Indian government and the Reserve Bank of India (RBI) may need to devise strategic measures to mitigate the impact of these rising energy prices. The central bank will likely face pressure to adjust monetary policy in response to persistent inflation, which Moody’s estimates will average 4.5% in 2026, a 1 percentage point increase from prior forecasts. In light of these challenges, proactive fiscal measures, targeted support to vulnerable sectors, and potential diversification of energy sources will be critical steps for India to navigate the prolonged economic repercussions of the ongoing geopolitical tensions.