At the end of April—two months into the US-Israeli war on Iran—global crude oil prices touched a four-year high above $120 per barrel, compounding worries for import-dependent countries like India. But when the US and Iran agreed on a 60-day ceasefire on June 17, prices began to cool and fell over 30%. And policymakers in India heaved a sigh of relief.
The ceasefire lasted barely three weeks, and both sides—as well as financial and commodity markets worldwide—appeared to remain in a limbo for another couple of months. Until this week.
The US carried out strikes on five Iranian oil tankers near Kharg Island this week. Iran responded by firing ballistic missiles towards Jordan and warning that vessels in the Persian Gulf could be targeted.
Separately, the Iran-backed Houthis attacked Saudi Arabia’s oil facilities and raised tensions in the Bab al-Mandab Strait in the Red Sea, which has become more important for some shipments as flows through Hormuz have fallen.
The escalation pushed Brent crude prices above $100 a barrel on Wednesday and $108 on Thursday—the highest since May 19. India’s crude oil basket has followed a similar trajectory—from $114.5 per barrel in April to $82 in July and back above $104 this month.
The immediate concern is supply. Before fighting resumed on August 30, an estimated 8-9 million barrels of oil a day were moving through the Strait of Hormuz, according to Rystad Energy. This has fallen below 2 million barrels a day.
That is the central problem for the market. The issue is not simply whether crude exists, but whether it can be moved from producers to buyers.
The latest escalation could disrupt oil flows further. One particular uncertainty is what happens to ship-to-ship transfers in the Gulf of Oman, which have helped keep some oil moving to global buyers. If those transfers decline, less crude could reach the market.
Markets are already reassessing the price of that risk. Goldman Sachs, Bank of America and HSBC have all raised their oil-price forecasts recently. Jeffrey Currie, co-chairman at Abaxx Markets, has described the additional cost embedded in prices as a “security premium” for geopolitical risk.
There are some offsets. The US, Canada and Guyana have increased production, which can cushion part of the disruption. But the International Energy Agency has estimated that global oil supply could still fall by 4.3 million barrels a day this year, or about 4%.
For India, the transmission is already visible. India imports nearly 90% of the crude it consumes. Yet petrol and diesel prices have remained unchanged for more than three months, even as international oil prices have risen.
The prices were last revised in May, over four rounds, by a total of Rs 7.35 a litre for petrol and Rs 7.53 for diesel.
The higher cost has not disappeared. It has moved into the books of the companies selling the fuel. Ratings firm ICRA estimates that public-sector oil marketers are currently losing about Rs 5 a litre on petrol and Rs 23 on diesel.
Domestic LPG is adding another burden, with estimated under-recoveries of about Rs 200 a cylinder. The three public-sector oil companies together reported a net loss of more than Rs 18,000 crore in the April-June quarter.
The pressure does not end with the oil companies. India imports nearly 2 billion barrels of crude a year, and every $1 increase in the price of a barrel can add up to $2 billion to the annual import bill.
Crude is India’s largest merchandise import, with imports worth about $135 billion in 2025-26. Between April and July this year, the crude import bill rose 56% from a year earlier to $63.4 billion, even though import volumes were broadly unchanged.
That is why the duration of the disruption matters as much as the price itself. Markets are still trying to assess whether the latest escalation is another temporary disturbance or a more persistent change in the flow of oil from West Asia.
The Trade Test
Costlier crude isn’t India’s only worry at the moment. It also faces concerns related to trade. And this week, two of India’s largest trading partners—the US and the European Union—pointed out some of these concerns.
At the World Trade Organization’s eighth trade policy review of India, the US and the EU raised concerns over India’s tariffs and a range of regulatory and non-tariff barriers, including sanitary and phytosanitary (SPS) measures, technical standards, Quality Control Orders (QCOs), local-content requirements, restrictions on services and digital trade, and access to government procurement.
The review is essentially a five-yearly stock-taking exercise. WTO members study India’s trade policies, send questions and then raise their concerns directly with New Delhi.
The US called for lower tariffs, the removal of what it described as unjustified SPS measures, fewer barriers to services and digital trade, and changes to regulations that it said discriminate against foreign exporters and investors. The EU focused on what it described as unpredictable customs procedures, cumbersome SPS requirements, gaps in intellectual property and geographical-indication protection, and narrowing access to government procurement.
QCOs are where the disagreement becomes particularly concrete. The EU said India’s growing use of QCOs was creating burdensome conformity-assessment requirements based on domestic standards that differ from internationally agreed standards. It said this risked insulating the Indian market from the global economy. But the EU also acknowledged that India has begun addressing the issue following a NITI Aayog High-Level Committee report on QCOs. It said full implementation of the committee’s recommendations could address many of its concerns.
The US similarly welcomed India’s repeal of some QCOs, while saying others continued to affect exports of information and communication technology products, medical devices and chemicals.
India defended its regulatory framework. It said its SPS measures were intended to facilitate legitimate trade while protecting public health, food safety and biosecurity. It also said its QCOs and other technical regulations pursue legitimate objectives, including protecting human, animal and plant health and the environment.
Services remain another sticking point. The US said foreign participation was still restricted or prohibited in several sectors, and specifically raised concerns over electronic payments, retail and e-commerce. It also urged India to avoid restrictions on cross-border data flows, including sector-specific data localisation.
Local-content requirements were another US concern, with Washington saying they reduce the competitiveness of imported products in sectors including ICT goods, services, spirits and medical devices.
The EU, meanwhile, said the recently concluded India-EU free trade agreement should strengthen trade and investment ties once ratified. But it stressed that implementation would be critical, particularly on the agreement’s rules covering non-tariff barriers.
That may be the most important part of the discussion. India is negotiating greater access to overseas markets through trade agreements, while its trading partners are asking for greater access to India. The agreements can settle the terms on paper. Their effect will depend on how those terms work in practice.
A Difficult Thaw
From the US and EU, let’s now move on to China.
India and China have made progress in repairing their diplomatic ties since the tensions of 2020. But companies on both sides are still behaving as if the relationship has a long way to go.
Chinese President Xi Jinping is visiting New Delhi this weekend for the annual BRICS summit. A meeting with Prime Minister Narendra Modi would be closely watched for signs of how far the diplomatic thaw can extend to economic ties.
There has been movement. India eased some restrictions on Chinese investment in March, focusing on electronics, capital goods and solar cells, and is considering faster approvals for some joint ventures. New Delhi has since approved projects including a manufacturing venture between Dixon Technologies and Chinese smartphone maker Vivo.
But some of the biggest Chinese companies have not followed. Vehicle makers BYD and Great Wall Motor have not revived planned investments in India after facing heightened scrutiny from New Delhi.
The hurdles now run in both directions. India has declined to approve a proposal by Alipay, linked to China’s Ant Group, to connect with India’s instant payments system, citing national security concerns. The government is also considering a recommendation to investigate Xiaomi over alleged business irregularities and breaches of foreign investment laws. On its part, Xiaomi has said it complies with Indian laws.
Chinese companies are facing scrutiny from Beijing as well. Indian sources told Reuters that Chinese authorities have asked companies not to sell critical technology and infrastructure to India, including port equipment, solar panels and mobile manufacturing equipment.
The friction is not confined to big investments. India and China resumed direct flights last year and New Delhi eased visa procedures for Chinese business professionals. Yet some Indian businesspeople have recently faced difficulties obtaining Chinese visas.
Sometimes the friction is easier to see than to measure. Chinese-made equipment and components needed by Indian industries, including solar energy, electronics and infrastructure, have been held up at Chinese customs, according to a Reuters report. Some large boring machines for Indian infrastructure projects have reportedly been held up for more than a year.
Even the official language points to the problem. A Chinese foreign ministry spokesperson said Xi and Modi view the two countries as “partners, not competitors”. Indian analysts, meanwhile, continue to point to a high trust deficit.
A Modi-Xi meeting could help remove some of these barriers. For companies, though, the real test will be whether investment, visas, technology and equipment can move with greater predictability.
Finding a New Route
Moving on to corporate developments, India’s auto sector was in news this week for more reasons than one. While Maruti Suzuki lifted car prices for the third time since May, Tata Motors said its British luxury unit Jaguar Land Rover would cut nearly 10% of its workforce as part of a turnaround plan.
Meanwhile, the German giant Volkswagen is turning to an Indian partner to strengthen its position in India.
Volkswagen has signed a non-binding memorandum of understanding with billionaire Sajjan Jindal-led JSW Group for a proposed 51:49 joint venture covering its passenger-vehicle operations in India. The two companies will now hold exclusive talks on valuation and other terms, with a binding agreement targeted by December 2026.
The proposed JV would expand Volkswagen’s portfolio, increase local sourcing and strengthen manufacturing in India. The companies will also explore sharing vehicle platforms and expanding production capacity.
Volkswagen’s challenge is one of scale. The European company—which owns brands such as Volkswagen, Skoda, Audi, Porsche, Ducati, and Lamborghini—has been in India for more than two decades. But despite its long presence in India, it has struggled to build a larger business in a market that has become increasingly important to its strategy beyond Europe. Its market share in India is still about 2%.
JSW, by contrast, entered the passenger-vehicle market only in 2023. It did so through JSW MG Motor India, its joint venture with Chinese state-owned automaker SAIC Motor, which sells MG-branded cars. A deal with VW would deepen its presence in passenger vehicles.
The proposed partnership comes as Volkswagen faces pressure to improve competitiveness and profitability in India, amid rising competition from Chinese automakers, tariff pressures and a prolonged slowdown in China.
Its India operations have also faced regulatory friction. Indian authorities raised a $1.4 billion tax demand against Volkswagen in 2024 over alleged import-tax evasion. Volkswagen challenged the demand, saying it had complied fully with Indian laws and regulations. The case remains pending.
But for now, there is only a non-binding agreement. The valuation, structure and other terms still have to be worked out. For two companies at very different stages of their automotive journeys, that makes the next step as important as the announcement itself.
Market wrap
India’s stock market benchmarks extended their losses for a fifth straight week, as rising oil prices due to tensions in the Middle East lifted concerns about inflation and interest rates.
Both the Nifty 50 and the BSE Sensex fell over 2% this week, stretching their losses to about 4.8% over the last five weeks. The small-caps lost 0.9% while the mid-caps fell 1.4%.
Brent crude oil prices as high as $108 per barrel on Thursday before falling a tad. This, along with a sharp drop in the rupee, fuelled inflation fears. Also, global bond yields climbed to multi-year highs, weighing on sentiment.
As many as 14 of the 16 major sectors recorded weekly losses, led by the steep 5.8% drop in the IT Index amid concerns of a possible rate hike by the US Federal Reserve that could dent demand.
Infosys was the worst Nifty 50 performer, slumping over 8%. HCL Tech was No.2, slipping 6.75%. Wipro slid over 5%, TCS lost 4.5% and Tech Mahindra dropped 3.5%.
Among heavyweights, Reliance Industries sank 4.9% and ICICI Bank dropped 3.1%. SBI Life, JSW Steel, Jio Financial, UltraTech, Tata Motors Passenger Vehicles, Sun Pharma and Tata Steel lost more than 3% each.
Max Healthcare was the top Nifty gainer, climbing 5.4%. Its peer Apollo Healthcare also ended in the green.
Adani Enterprises jumped over 4% after saying its airports unit raised $1 billion from Singapore’s Temasek, US-backed BlackRock and other investors at a valuation of $18 billion. Adani Ports was the third-highest gainer, rising 3.4% after CEO Karan Adani and CFO B Ravi settled allegations of stock market rule violations with SEBI.
Other Headlines
- Trump administration proposes axing 60-day grace period for H-1B visa holders after job loss
- NSE fixes IPO price band at Rs 1,700-1,785; targets valuation of up to $46.3 billion
- Adani Airports raises $1 billion from Temasek, BlackRock, others at $18 billion valuation
- Coforge chairman OP Bhatt resigns over board evaluation concerns
- Wipro CTO says AI push frees capacity equivalent to 20,000 employees
- Govt signals stricter red warning labels in packaged food and drinks
- Apple Inc raises prices of existing iPhone devices in India by up to 41%
- SEBI settles disclosure violation charges against Adani Ports CEO Karan Adani, CFO B Ravi
- Equity mutual fund inflows in August at Rs 29,329 crore, up 18.8% from July
- Mutual fund SIP inflows rise 1.1% to record Rs 32,297 crore in August
- Hero Motors sets IPO price band at Rs 79-84; targets valuation of Rs 3,815 crore
- SEBI proposes easing board rules for stock exchanges, other market institutions
That’s all for this week. Until next week, happy investing!
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