US-Iran War

In early 2026, following months of escalating tensions over Iran's nuclear programme, the United States launched airstrikes on multiple Iranian nuclear facilities. Iran responded with missile strikes on US military bases in the region and threatened to close the Strait of Hormuz — the narrow chokepoint through which approximately 40% of India's crude oil imports pass every day.

The threat alone was enough to send shockwaves through global commodity markets. Crude oil prices surged as traders priced in the risk of a sustained supply disruption. Gold rallied strongly on geopolitical uncertainty — the classic flight-to-safety trade that has played out in every major conflict since 1973.

For India, the consequences were particularly acute. As the world's third-largest oil importer, any disruption to the Strait of Hormuz creates immediate pressure across the entire economy. The rupee fell sharply from ₹87 to ₹96 per dollar as India's prospective import bill threatened to widen the current account deficit dramatically. The Sensex declined on fears of imported inflation and the monetary tightening that would follow.

The 2026 crisis underlined a structural vulnerability that has persisted since 1947: India's economic stability is deeply exposed to events in the Persian Gulf. Despite decades of diversification, over a third of India's oil still flows through a single waterway controlled by regional powers whose stability India cannot influence — making the rupee and fuel prices perpetually hostage to Middle Eastern geopolitics.