India's Energy Diplomacy Shields Economy from West Asia Conflict Disruption

Anindya Banerjee, vice president at Kotak Mahindra Securities, said that India is sourcing its energy requirements from diverse countries in the wake of disruptions.

"The issue is a global kind of disruption which has happened, and this is not our war. It's a war of Israel and America with Iran. They have to settle this course, but the impact will be felt by everybody. Because of our energy diplomacy, we are able to engage with parties who are adversaries among themselves....We are able to get passage for our ships through Hormuz... the only country which can do it with ease on a global scale is India," he told ANI.

Banerjee said India is also procuring oil from Russia. "Russia has a very large amount of oil at sea, which means floating storage... what we are seeing is that floating storage is now getting directed towards the Asian partners - China as well as India," he noted.

"Right now, we are not facing an energy price shock. What we are seeing is an energy shortage... 10 to 12 per cent of your oil flow is disrupted and around 20 per cent of gas flows are disrupted," Banerjee said.

On inflationary impact, he said the pressure on prices in India may remain limited if the disruption does not persist for long.

"CPI, which is around 3 to 3.2 per cent, can inch towards the RBI's lower band of 4 per cent, but the impact may remain largely restricted to headline inflation if the disruption lasts only a few months," he said.

"RBI has the tools in place to support the rupee... through spot intervention, forward intervention and buy-sell swaps. They can even intervene through the NDF market," he said.

Looking ahead, Banerjee said India is already working on a long-term strategy to reduce dependence on fossil fuels through renewable energy and alternative sources.

"India is already on that path... be it solar, small modular reactors in nuclear energy, green hydrogen or green ammonia. That is the way forward," he said.

RN Bhaskar, founder of AsiaConverge, said that despite the geopolitical turmoil, India continues to receive crude supplies from alternative sources, particularly Russia.

"India will continue to get oil from Russia even during the international crisis. Freight costs from Russia remain lowest, helping India save significantly. Insurance costs are also lower compared to supplies from Australia or South America, giving India a strategic advantage," Bhaskar said.

However, he noted that the crisis has also put pressure on India's energy import bill and overall economy.

"India's import bill will double, while exports remain weak due to financial strain in Europe and America and limited trade with Islamic countries," he added.

Bhaskar further highlighted that disruptions in gas supply from the Gulf region could add to India's energy challenges in the near term.

"India will need to secure long-term gas deals with Russia, Australia, or the US, since gas production cannot be stopped once started," he said.

Navneet Damani, Head of Research Commodities, Motilal Oswal Financial Services Ltd, referred to the impact of markets of the volatility in oil markets.

"In commodity markets, geopolitical shocks rarely arrive without warning, but when they do, price reaction can be swift and dramatic. That is exactly what global oil markets witnessed. In the first week of Mar'26, crude prices surged more than 50%, marking one of fastest rallies in recent years as a diplomatic standoff in the Middle East spiralled into a full-scale regional conflict," Damani said.

"Brent crude briefly climbed to around USD 120 per barrel, while WTI touched USD 113, reflecting the market's sudden shift from 'supply excess to supply anxiety'. Despite production increases by OPEC+ since last year and stronger demand projections by the IEA in its latest 2026 outlook, it was ultimately a geopolitical trigger that forced a sharp shift in crude oil prices," he added.

Damani said oil markets are uniquely sensitive to geopolitical disruptions, particularly in the Middle East which accounts for nearly a third of global crude exports.

"The current rally is a clear reminder that while supply fundamentals may appear comfortable on paper, geopolitical events can quickly reshape market dynamics. After briefly surging to USD 120 per barrel in one of crude's biggest intraday rise, it retreated sharply toward the USD 100-USD 105 range. The pullback reflects a mix of profit booking and early signs that governments and producers are moving to cushion supply shock," he said.

Japan's decision to tap its strategic petroleum reserves for first time in decades, discussions among G7 nations around a coordinated stock release, and reports that Saudi Aramco has begun offering additional spot cargoes have helped calm immediate supply concerns, he added.

Damani said while some producers have alternative export routes, such as Saudi Arabia's East-West pipeline to the Red Sea and the UAE's Fujairah pipeline, these routes can handle only a fraction of the region's total crude exports. As a result, the outlook remains closely tied to developments around the Strait of Hormuz.

Any renewed geopolitical escalation or prolonged disruption to tanker traffic could keep prices elevated, while sustained high oil prices also risk fuelling inflation and increasing diplomatic pressure to restore stability. Domestic prices could also be triggered by volatility in USDINR which has been elevated since last few months, he said.

- ANI