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The ongoing geopolitical tensions are unlikely to put a “significant pressure” on the rupee or inflation as global energy prices are lower than last year, which will limit current account outflows and domestic energy price pressures, S&P Global Ratings said on Tuesday.
S&P Global Ratings Economist Vishrut Rana said a key mitigating factor of India is that energy prices are still lower than last year — Brent crude oil traded at roughly $85/barrel a year ago and current prices are still lower.
“This will help contain both current account outflows and domestic energy price pressures — while energy prices may rise moderately, the path of food prices will have a higher impact on inflation. Overall, we do not expect significant pressure on the Indian rupee or inflation,” Rana told PTI.
Rates of the benchmark Brent crude fell to around $69 a barrel after US President Donald Trump announced that Israel and Iran have agreed to a “complete and total ceasefire”.
Israel and Iran have been at war over the past 12 days with Israeli military strikes, followed by counterstrikes by Iran. US, too, joined the war with military strikes on Iran’s three most critical nuclear facilities.
India imports more than 85 per cent of its crude oil and roughly half of its natural gas requirement. More than 40 per cent of the oil imports and half of gas imports come from the Middle East.
S&P estimates inflation to average 4 per cent in 2025, down from 4.6 per cent in 2024. It forecasts rupee to weaken to 87.5 a dollar by the end of 2025, from 86.6 at 2024-end.
The Indian rupee opened at ₹86.13 to a dollar in morning trade on Tuesday, up 65 paise over Monday’s close.
Rana also said heightened risk-aversion in global financial markets due to ongoing geopolitical tensions may cause INR volatility.
In addition, higher oil prices may lead to higher current account outflows for India and contribute to a weaker Indian rupee.
“However, a key mitigating factor is that energy prices are still lower than last year,” Rana added.
To a query on the impact of conflict on GDP growth, Rana said the impact on growth prospects for the world is modest for now, but prolonged geopolitical tensions are a risk to growth.
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Published on June 24, 2025
