Due to the escalated tensions between Iran and the US following the airstrike, India has received its first blow with the Indian rupee hitting a near one-month low at 71.61 per dollar on Friday morning, weighed by the surge in Brent crude, compared to the close at 71.37 per dollar on Thursday.
Brent crude futures jumped close to $3 on Friday and are to hit a high of $69.16 a barrel, their highest since September.
The oil import bill is expected to reach a record high as India imports nearly 84% of its oil needs. In the current economic condition when the government is cutting its expenditure by half for the next three months, traders fear growth will further come down.
The death of Iranian commander Qassem Soleimani, who led the Revolutionary Guards’ Quds force, heightened fears of an armed conflict between the US and Iran that could easily pull in other countries, a report by Bloomberg has said.
Oil prices rose to over 13.3% in December due to the progress in US-China trade talks and political unrest in Iraq.
The Indian economy is in a slump as it recorded GDP growth had slowed to its lowest in the last six years to 4.5 percent in the July-September quarter of the current fiscal year.
Rising inflation and falling growth has forced India’s central bank to lower the growth forecast for the current financial year to 5 percent from the previous estimate of 6.1 percent.