Surging Crude Oil price keeps India tensed, What is there for Indian Economy ?

Oil prices surged after the killing of Iranian commander, General Qassem Soleimani, in a US drone strike in Baghdad, senior officials of the Finance Ministry and the Ministry of Petroleum and Natural Gas held a high-level meeting Friday to assess the impact and review contingency measures.It is expected that Indian Airlines will immediately get affected by it. 

• What's the story ?

Following the US air strike that killed Iranian commander General Qassem Soleimani , international benchmark Brent crude traded at $68.65 Friday morning, up more than 3.6%, having earlier spiked to an intraday high of $69.16. Jet fuel accounts for one-third of the costs for Indian carriers, which were already struggling when oil was hovering at $65-66 per barrel.

Officials in the Petroleum Ministry are learnt to have held an internal meeting, following which they were called to the Finance Ministry for discussions, given the possibility of a disruption to oil supplies impacting India’s external debt situation and restricting the headroom to counter the slowdown.In the hours after Soleimani’s death, “one thing is clear: Iran will respond,” analysts at political risk consultancy Eurasia Group said in a research note published Friday.

“We expect moderate to low-level clashes to last for at least a month and likely be confined to Iraq. Iranian-backed militias will attack U.S. bases and some U.S. soldiers will be killed; the U.S. will retaliate with strikes inside of Iraq.”Iran’s supreme leader Ayatollah Ali Khamenei on Friday called for vengeance on the US, prompting brokerages to forecast a further spike in oil prices. “(We) expect crude to boil if Iran retaliates," Abhimanyu Sofat, head of research, IIFL Securities, said in a statement.

• What's Next ?

With gulf getting tensed over the possibilities of a faceoff between US and Iran,Indian economy might suffer the pain as quartet of Iraq, Saudi Arabia, Iran and the UAE are the top crude suppliers to India, all of which are in the geographical zone likely to be impacted. It is estimated that a $10-per-barrel increase in the price of oil would negatively impact India’s growth by 0.2-0.3 percentage points and worsen the Current Account Deficit (CAD) by $9-10 billion dollars.On Friday, in response to the global crude price hike, state-run fuel retailers increased the price of petrol by 10 paise and that of diesel by 15 paise a litre.