New Delhi, March 17: Amid ongoing volatility in crude oil prices due to the West Asia war, oil prices are expected to settle at around USD 80 per barrel in the current financial year 2027, according to a report by ICICI Bank.
The report highlighted that the recent escalation in the Middle East conflict, along with the blockage of key trade routes, has led to a sharp increase in global oil prices, which have risen above USD 100 per barrel compared to an average of USD 66 per barrel during April 2025 -February 2026.
It noted that the disruption of the Strait of Hormuz, which contributes to about 20 per cent of global energy trade, has significantly impacted global oil supply.
It stated, "we believe that the oil prices could settle at ~USD 80/bbl. levels in FY27".
The report explained that for a normal oil price shock, every USD 10 per barrel increase in oil prices could lead to an increase in net oil imports and India's current account deficit by about USD 12 billion or 0.3 per cent of GDP.
However, in the current scenario, the impact could be broader due to disruptions in the region. India's goods exports, of which 15 per cent are linked to the region, and remittance inflows, which account for 38 per cent, could also be affected.
Despite a challenging global trade and geopolitical environment, India's goods exports have recorded modest growth of 1.8 per cent year-on-year in the current fiscal so far. Non-oil exports have performed better, rising by 5 per cent year-on-year.
On the import side, goods imports have grown at a faster pace of 8.5 per cent year-on-year, driven by higher gold imports, which surged by 29 per cent year-on-year, along with strong non-oil non-gold imports growing at 10.6 per cent year-on-year.
The report noted that both oil exports and imports have remained subdued so far, with oil exports declining by 17 per cent year-on-year and imports falling by 3 per cent year-on-year due to relatively lower oil prices earlier.
India remains particularly vulnerable to rising oil prices due to its high import dependence, with around 52-60 per cent reliance on oil imports and about 80-85 per cent dependence on petroleum gas imports from the region.
Given these factors, the report revised its base case for India's goods trade deficit to USD 383 billion in FY27, up from the earlier estimate of USD 363 billion.
Similarly, the current account deficit is now projected at USD 60 billion or 1.4 per cent of GDP, compared with earlier estimates of USD 45 billion or 1.0 per cent of GDP.
The report added that while the war and trade disruptions are not expected to last for a prolonged period, the sharp rise in oil prices and associated risks could continue to impact India's external balances in the near term. (ANI)
