Oil price volatility from Hormuz tensions and its cascading effect on India’s
inflation, fiscal deficit, and rupee stability

Raaina Kothari

doi:10.46609/IJSSER.2026.v11i07.020

Title: Oil price volatility from Hormuz tensions and its cascading effect on India’s inflation, fiscal deficit, and rupee stability
Authors: Raaina Kothari
Journal: International Journal of Social Science and Economic Research (IJSSER) ISSN: 2455-8834 Volume: 11 Issue: 7 Publication Date: July 2026 DOI: 10.46609/IJSSER.2026.v11i07.020
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Raaina Kothari Welham Girls' School Dehradun
MLA 8 Kothari, Raaina. "Oil price volatility from Hormuz tensions and its cascading effect on India’s inflation, fiscal deficit, and rupee stability." Int. j. of Social Science and Economic Research, vol. 11, no. 7, July 2026, pp. 3174-3191, doi.org/10.46609/IJSSER.2026.v11i07.020. Accessed July 2026. APA 6 Kothari, R. (2026, July). Oil price volatility from Hormuz tensions and its cascading effect on India’s inflation, fiscal deficit, and rupee stability. Int. j. of Social Science and Economic Research, 11(7), 3174-3191. Retrieved from https://doi.org/10.46609/IJSSER.2026.v11i07.020 Chicago Kothari, Raaina. "Oil price volatility from Hormuz tensions and its cascading effect on India’s inflation, fiscal deficit, and rupee stability." Int. j. of Social Science and Economic Research 11, no. 7 (July 2026), 3174-3191. Accessed July, 2026. https://doi.org/10.46609/IJSSER.2026.v11i07.020.
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ABSTRACT: This study examines the potential macroeconomic consequences of a prolonged disruption in the Strait of Hormuz on the Indian economy. As one of the world's most important maritime chokepoints, the Strait facilitates a significant share of global crude oil and liquefied natural gas trade. Given India's heavy dependence on imported energy from the Gulf region, any disruption in this route could have far-reaching economic implications. The findings suggest that higher crude oil prices would increase production and transportation costs, resulting in imported costpush inflation, reduced industrial output, slower GDP growth, widening trade and current account deficits, depreciation of the Indian rupee, and weaker employment generation across sectors such as manufacturing, logistics, tourism, agriculture, and MSMEs. The way ahead are long-term energy security that requires continued diversification of energy imports, greater investment in renewable energy, stronger strategic reserves, and enhanced international cooperation.

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