India hit by high oil prices, flights canceled due to Iran conflict

New Delhi is feeling the heat as tensions in the Middle East show no signs of abating, soaring oil prices threaten to add to already hefty energy import bills and disruptions to flight routes hamper airline operations.

Pankaj Srivastava, senior vice president at energy research firm Rystad Energy, said India imports nearly 85% of its crude oil, equivalent to about 4.2 million barrels per day, and that “even a price increase of a few dollars could have a significant impact on (the country’s) energy economy.”

“Rising (oil) prices could weigh on the balance of payments and put further pressure on the rupee,” he said.

Oil prices have soared and supply shocks have come into focus since the US and Israeli offensive against Iran, OPEC’s fourth largest oil producer, began last weekend. Following the killing of the Islamic Republic’s supreme leader Ayatollah Khamenei, the Iranian government launched a wave of attacks across the region targeting Middle Eastern countries with US military bases.

On Monday, Brent crude oil prices hit a new 52-week high, rising 9.3% to $79.40 a barrel.

“For every sustained $10 per barrel increase in oil prices, there is a direct hit of 20-30 (basis points) to Asian GDP growth,” Morgan Stanley said in a note on Sunday, adding that India could be particularly vulnerable.

India’s current account deficit, equivalent to 1.2% of gross domestic product, will widen by 50 basis points for every $10 per barrel increase in oil prices, analysts said.

“Thailand, South Korea, Taiwan and India will be exposed to downside growth due to wider oil and gas balances,” the report said.

Oil shipments through the Strait of Hormuz have been halted due to sky-high insurance premiums due to Iranian attacks on U.S. military bases in the Gulf, experts say, also pushing up oil prices.

The Strait of Hormuz is an important waterway that connects major energy producers such as Saudi Arabia, Iran, Iraq, and the United Arab Emirates to global markets, and is responsible for approximately 20% of the world’s oil supply.

The latest ship tracking data suggests that about half of India’s crude oil imports now pass through the Strait of Hormuz, global brokerage Nomura said in a report on Sunday.

“This is bad timing for India,” Ellen Wald, president of Transversal Consulting, told CNBC’s “Inside India” on Monday. He added that if India buys additional Russian oil cargoes, “India’s oil purchases will come under close scrutiny.”

India imported 1.16 million barrels per day of Russian crude until a week ago, below its average intake of 1.71 million barrels per day in 2025, according to energy data provider Kpler. This oil was replaced by supplies from the Middle East, but that supply has now been cut off.

Since August last year, India’s exports to the US have been subject to a 50% tariff, 25% of which was a punitive tariff aimed at discouraging India from purchasing Russian crude oil.

Following last month’s interim trade agreement, the US said New Delhi would “commit to suspend direct or indirect imports of Russian Federation oil” and purchase “energy products from the United States” and eliminate punitive tariffs on India.

However, the US government has warned New Delhi that it will monitor India’s imports of Russian crude oil and that any attempt to restart purchases could lead to the resumption of punitive tariffs. Therefore, supply disruptions due to the Iran conflict will become even more problematic for India.

Despite the intense scrutiny, Wald said, “No one can blame them (India) for doing what they had to do to get through the next month.”

Rystad Energy’s Shrivastava said it was still likely that India would resume buying Russian crude as “substantial quantities of Russian crude of suitable grades are already available on the water.”

While the impact of rising oil prices is a major concern for New Delhi, the disruption to flights due to the closure of airspace over the Middle East is an immediate stress impacting travelers to and from India.

Sajay Lazar, CEO of Indian aviation consultancy Aviaraz Consultants, said westbound flights from India would fly over Iran and the Arabian Peninsula. “The Middle East Corridor is India’s largest westbound corridor and this (disruption) will have a major impact on IndiGo and Air India,” he added.

Some flights from India to Europe and the UK have been canceled and others rerouted as the Middle East remains a de facto “war zone” and Indian airlines continue to close Pakistan’s airspace.

Shares in Indian passenger airline Indigo. interglobe aviationopened nearly 5% lower on Monday.

The airline did not respond to CNBC’s request for comment, but said in a post on Monday that “the suspension of some international flights over portions of Middle East airspace has been extended.”

with tata group Singapore Airlines-Air India on Monday canceled all flights to and from the UAE, Saudi Arabia, Israel and Qatar, it said in a post on X. It also canceled some flights from New Delhi to Europe, but said many other flights to Europe and North America would continue to operate as scheduled “using alternative routes in available airspace.”

Aviation experts say the alternative routes will not only increase flight time but also significantly increase costs for these airlines. Currently, flight times for westbound flights departing from India have been extended by up to four hours.

“The weekly impact on international airlines flying to and from India is very conservatively estimated at 875 million rupees (about $96 million),” said Mark D. Martin, an aviation expert at Martin Consulting. He added that the “airspace situation” was not likely to improve for at least a week.

On Sunday, President Trump told the Daily Mail that the conflict with Iran could last for the next four weeks. Meanwhile, Iranian Security Secretary Ali Larijani said in a post on X that Iran has no plans to negotiate with the United States.

Martin said if the situation escalates further, India could ask China to use its airspace from the north, allowing aircraft to fly over the Commonwealth of Independent States and into Europe.

A total of 350 flights operated by domestic airlines were canceled on Sunday, India’s aviation regulator said.