New Delhi, March 7 (IANS). The ongoing conflict in the Gulf region, which involves military bases linked to Israel, Iran and the US, could have a major impact on the global economy. According to a report by SBI Research released on Saturday, if this conflict continues for a long time, it may increase the pressure of global recession, increase in inflation and instability in financial markets.
However, the report said that India’s domestic financial markets are currently supported by the steps taken by the Reserve Bank of India (RBI). RBI has intervened to keep government bond (G-Sec) yields balanced and control rupee volatility.
According to the report, if this conflict continues for a long time, it may also put pressure on India’s macro-economic indicators.
The report said that the RBI has reduced the excessive volatility of the rupee by intervening in the spot market and has succeeded in keeping it below the 92 level. According to the report, this step is considered very important amid the current uncertainty.
According to the report, the closure of the Strait of Hormuz has affected the global energy market. About 20 percent of the world’s crude oil is traded through this route, so due to the disruption here, oil prices are seeing a rise.
At present, the price of Brent crude has reached $ 91.84 per barrel and WTI has reached $ 89.62 per barrel.
According to SBI Research, if the price of crude oil increases by $ 10 per barrel, the current account deficit (CAD) could increase by about 36 basis points in FY 2027.
The report said that if the oil price reaches $130 per barrel, India’s GDP growth rate may come down to about 6 percent.
SBI Research has also analyzed this conflict from a historical perspective. According to the report, the war is taking place during the final phase of the Kondratieff Wave, a theory of long-term economic cycles. This could have structural impacts on the global economy.
According to the report, some countries may also benefit from this conflict. For example, the US may benefit from rising oil and gas prices. Additionally, Europe’s reduced dependence on Russian energy could create new opportunities for the US.
At the same time, pressure on economic activities may increase in most other regions of the world.
The report says that amid increasing volatility in the market, many central banks are increasing gold reserves as a safe investment. Gold currently accounts for about 17.6 percent of India’s foreign exchange reserves.
According to the report, this conflict can affect India in many ways. This includes remittances coming from Gulf countries, import of crude oil and trade with West Asian countries.
However, due to steps like purchase of Russian crude oil and forward contracts, supply-related risks may be reduced to some extent.
The report also said that Indian banks and private companies are also involved in sectors that could be affected by this conflict.
The report concluded that rising uncertainty in the Gulf region will continue to weigh on oil prices, inflation expectations and investor confidence going forward. Therefore, policy makers and investors need to keep a close eye on this situation.
–IANS
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