A few months ago, India’s economy was humming along nicely. Inflation was benign and growth was steady – the strongest among the world’s leading economies.

Now, India is increasingly counting the cost of the Iran war, which ​economists say will keep mounting if the deadlock between the U.S. and Iran remains unresolved and the blockage of oil supplies continues.

As the world’s third-largest oil importer and consumer, India ‌ships in about 90% of its oil, making its economy one of the most-exposed to the war and the prolonged war-related disruptions, which include the effective blockade of the Strait of Hormuz through which a fifth of global oil and gas transit.

While India has announced a flurry of measures to contain the impact on the rupee and foreign exchange reserves, the latest of which were from the Reserve Bank of India on Friday, analysts say the broader drag on economic growth, inflation and government finances is set ​to increase so long as oil prices remain elevated.

“India is set for a series of supply shocks,” Michael Langham, emerging markets economist at Aberdeen Investments, said.

Apart from pressure on oil prices, the country ​also faces supply disruptions to fertiliser as a result of the Iran war, which will impact key crops like wheat when farmers are already bracing for an ⁠El Nino weather phenomenon that often portends drought.

“This will all drag on India’s growth outlook, yet the ability of the RBI to look through the energy price shock from the Strait of Hormuz will be increasingly difficult ​given the overlapping nature of these supply shocks,” Langham said.

At the end of last year, India’s central bank governor, Sanjay Malhotra, talked about a “rare Goldilocks” phase for the economy as it headed into 2026. Inflation levels were falling ​and growth remained relatively strong.

The Iran war upended that outlook.

India’s oil-and-gas import bill jumped 53% in April from March, prompting forecasts for the balance of payments (BoP) deficit — essentially money coming into the economy netted off against money going out — to balloon.

HSBC says that Friday’s series of steps may do a lot to limit the currency damage. Until Friday, it had expected India’s BoP deficit to swell to about $65 billion in 2026-27, but now expects the measures to improve the balance by about $30 billion. In 2025-26, India’s BoP ​deficit was at $25.2 billion or 0.6% of GDP.

India is also curbing gold imports, urging citizens to limit foreign travel and calling for more use of public transport to reduce oil demand.

“DIFFICULT POSITION”

But the macro picture is ​more challenging.

Benchmark international oil prices surged after the war began on Feb. 28, climbing to nearly $120 per barrel. Prices have eased, but they remain about 30% higher overall, while gas prices have risen 75% over the same period.

As a result, the ‌central bank ⁠sees inflation averaging 5.1% in the financial year to the end of March 2027, up from a 3.48% reading in April, and economic growth slipping to 6.6% from 7.7% in the previous year.

While the RBI kept rates on hold last week, interest rate swap markets are pricing in at least 25 basis points of rate hikes over the next three months and more than 75 basis points over the next year.

“India continues to face deeper structural challenges which has weighed on foreign direct investment, employment, manufacturing expansion, consumption, and nominal GDP growth,” said Sat Duhra, portfolio manager at Asia ex-Japan equity team at Janus Henderson Investors.

Duhra said the energy shock will undermine growth and ​pressure government finances.

“Any move to rein in public-sector capex ​to stabilise conditions would risk further slowing growth,” ⁠he said. “This leaves policymakers in a difficult position.”

STRONG OIL DEMAND

India delayed raising retail fuel prices as import costs mounted. Petrol and diesel are up less than 10% since then, compared with 50% or more in some other oil-importing countries in Asia.

Petrol and diesel prices are deregulated, but the government exerts significant influence as the majority shareholder ​of the key retail companies.

Elsewhere, high prices have reduced demand and helped balance undersupplied markets.

The government has said it will not compensate fuel retailers for losses, ​a strategy analysts say will ⁠come at a cost for the government, such as through reduced dividends, and so cut its financial firepower to handle the crisis.

The government’s fertiliser subsidy is likely to jump 20% in 2026/27, a government official said. Fertiliser is vital for India’s agrarian economy, which supports nearly half the population, but may be more so this year given the risk of drought owing to El Nino.

The government also cut gasoline and gasoil taxes, forgoing 140-billion-rupees in monthly revenues.

The government is targeting ⁠a fiscal deficit ​of 4.3% of GDP this financial year, but a Reuters poll forecast it would swell to 4.7% and some economists see it ​going as high as 5%.

India-based credit rating agency Crisil expects further small price increases in retail oil prices, which will have a wider impact.

“The broader effect will reverberate across the economy through higher-transport costs, pushing up both food and core inflation,” it said in a ​report.

Reporting by Nidhi Verma in New Delhi and Ira Dugal in Mumbai; Additional reporting by Vivek Kumar M and Bharath Rajeswaran in Bengaluru; Editing by Simon Webb and Neil Fullick

Thomson Reuters

Israel launched airstrikes early Monday targeting central and western Iran in response to missile fire from Tehran, attacks that threatened to drag the wider Middle East back into a regional war. Iranian state television reported the sound of explosions being heard in Isfahan, Karaj, Tabriz and Tehran, without immediately elaborating. A witness in Tehran described hearing at least one large blast somewhere to the west of the country’s capital city. Iran closed the airspace around Tehran’s Imam Khomeini International Airport, the country’s main airfield, after the Israeli attack. Follow our live coverage for the latest updates.

10:27 AM, 8 June 2026

Yemen’s Houthis declare ban on Israeli shipping in Red Sea

Yemen’s Iran-backed Houthi rebels announced a missile attack on Israel on Monday and declared a ban on Israeli shipping in the Red Sea, raising the spectre of a return to major disruption on the key route.

“We declare a complete and total ban on Israeli maritime navigation in the Red Sea,” said a statement from the Houthis’ armed forces, which also confirmed the first missile attack on Israel since early April.

10:24 AM, 8 June 2026

Qatar, Iran discuss US-Iran mediation efforts

Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani, Prime Minister and Minister of Foreign Affairs of the State of Qatar received a phone call on Monday from Iran’s Foreign Minister Abbas Araghchi, according to QNA.

The two sides reviewed mediation efforts between the United States and Iran, as well as the latest developments in Lebanon.

During the call, the Qatari prime minister reaffirmed Qatar’s support for all efforts aimed at containing escalation and reaching a comprehensive agreement to strengthen regional security and stability and achieve lasting peace in the Middle East.

Prime Minister and Minister of Foreign Affairs Receives Phone Call from Iranian Foreign Minister #QNA #Qatar #Iranhttps://t.co/SByEqqthEg pic.twitter.com/w0aO4iYD4K

— Qatar News Agency (@QNAEnglish) June 8, 2026

09:50 AM, 8 June 2026

Iran Guards say struck two air bases in Israel

Iran said Monday it had struck Israel’s Nevatim and Tel Nof air bases, as the two sides traded fire in the largest flare-up in fighting since a ceasefire took effect in April.

“The operation was carried out in response to a missile attack launched by the Zionist regime… against several radar sites in three different places” in Iran, the country’s Revolutionary Guards, the ideological wing of Iran’s army, said in a statement.

09:31 AM, 8 June 2026

Middle East ‘does not need an escalation’: EU top diplomat

EU top diplomat Kaja Kallas urged calm Monday after Iran and Israel traded strikes, testing a fragile truce and threatening hopes for a deal to end the Middle East war.

“Overnight, we have seen escalation again. I think the region does not need an escalation, but actually that parties sit down to a negotiation table and agree,” Kallas said.

09:18 AM, 8 June 2026

Israel military says struck Iran petrochemical complex

Israel’s military said Monday it had struck several targets at a petrochemical complex in Mahshahr in southwestern Iran.

“A short while ago, the Israeli Air Force struck several targets at the petrochemical complex in Mahshahr, in southwestern Iran,” the military said.

08:56 AM, 8 June 2026

Israeli army says identified new missiles from Iran

The Israeli military said it had identified a second wave of missiles launched from Iran on Monday and its defensive systems were working to intercept them.

“Defensive systems are operating to intercept the threat,” the military said.

08:24 AM, 8 June 2026

Israel says targeted by new wave of Iranian missiles

AFP journalists heard at least eight explosions over Jerusalem on Monday as Israel said it was intercepting a new wave of Iranian missiles.

The Israeli army wrote on Telegram it had “identified missiles launched from Iran” and was working to intercept the threat.

An AFP journalist in Jerusalem witnessed at least one interception as residents hurried to shelters in the city.

Israel’s emergency service provider Magen David Adom said there were no reports of any casualties.

Iran has launched multiple waves of missiles towards Israel since Sunday evening, rattling a fragile truce between the two countries engulfed in the Middle East war.

08:09 AM, 8 June 2026

Iran-Israel Lebanon conflict timeline

The Middle East is suddenly bracing for war again. Iran fired missiles at Israel late Sunday in the first such bombardment in the two months since a ceasefire. What happened?

The truce in the Iran war that was reached in April has not spread to Lebanon, where Israel has been battling Iranian-backed Hezbollah militants. Israel says it is defending its northern communities that face Hezbollah drone and rocket fire.

Iran sees Israel’s ground invasion, with thousands of troops, and airstrikes in Lebanon as a ceasefire violation. It insists that any deal with the United States must end the fighting there. Israel disagrees.

Here’s a timeline of key events.

07:37 AM, 8 June 2026

Israel says working to intercept missile from Yemen

The Israeli army said Monday it was working to intercept a missile launched from Yemen.

Yemen’s Houthi rebels, who joined the Middle East war in March in support of Iran, have previously launched attacks on Israel.

The Israel Defense Forces wrote on Telegram that it “has identified the launch of a missile from Yemen toward Israeli territory, aerial defense systems are operating to intercept the threat.”

The Israeli military in a statement announced early Monday that a missile had been fired from Yemen toward Israel.

It also claimed that its air defense systems are intercepting and responding to this threat. pic.twitter.com/wbvv8wLI6M

— IRNA News Agency ☫ (@IrnaEnglish) June 8, 2026

07:00 AM, 8 June 2026

Saudi Civil Defence says danger has passed in Al Kharj

Saudi Civil Defence said the danger has now passed in Al Kharj Governorate. Authorities urged residents to continue following Civil Defence instructions, avoid gathering or filming, and call 911 in case of emergency.

Earlier, a warning had been issued via the National Early Warning Platform for the Al Kharj area.

A warning has been issued by the National Early Warning Platform in Al-Kharj Governorate to warn of a danger, follow the instructions below : pic.twitter.com/yPN7QXYMUQ

— الدفاع المدني السعودي (@SaudiDCD) June 8, 2026

06:31 AM, 8 June 2026

Early Monday blasts reported in western Tehran

Residents in western Tehran heard at least two explosions around 4.43am. and 4.45am, according to the Tehran Fire Department. Authorities say no urban areas were directly hit.

06:12 AM, 8 June 2026

Oil climbs above $95 as traders watch supply risks, global demand outlook

Oil prices rose sharply in Asian trading Monday, with benchmark crude contracts nearing multi-month highs as investors weighed supply risks, OPEC+ production policy and expectations for stronger energy demand later this year.

As of 11:02 am (June 8, 2026) in Tokyo, US benchmark West Texas Intermediate crude traded at $93.30 a barrel, up $2.76, or 3.05%. Brent crude, the international benchmark, gained $2.78 to $95.99 a barrel, a rise of 2.99%.

05:52 AM, 8 June 2026

Israeli army says struck targets in Iran

The Israeli army said Monday it had struck targets in western and central Iran, as Iranian state TV reported explosions in the cities of Tehran, Tabriz and Isfahan.

“A short while ago, the Israeli Air Force struck military targets belonging to the Iranian terror regime in western and central Iran,” the Israel Defense Forces posted on Telegram.

05:41 AM, 8 June 2026

Iran state TV says explosions heard across country

Iranian state TV reported explosions in three cities on Monday, as the Israeli army said its air forces had struck targets in west and central Iran.

“Several explosions heard in Tehran, Tabriz and Isfahan,” state TV posted on Telegram.

05:35 AM, 8 June 2026

US Embassy warns of missiles and drones over Jordan

The US Embassy in Jordan has warned that reports indicate missiles, drones or rockets are present in Jordanian airspace. The embassy urged residents to seek overhead cover, shelter in place immediately and remain indoors while monitoring local announcements and alerts.

The embassy said it is continuing to assess the situation and will provide further updates as needed.

03:09 AM, 8 June 2026

Mojtaba Khamenei is ‘very seriously injured’: Trump

US President Donald Trump told NBC’s Interviewer Kristen Welker during an explosive interview about his Iran war strategy, saying: “We’re very close to having a deal (with Iran) — and if we don’t have a deal, we’ll do it one way or the other. Either way, we win.”

On Mojtaba Khamenei: “I don’t want to say whether or not I know where he is, but there’s a good probability that I do… He’s very seriously injured.”

02:49 AM, 8 June 2026

World facing increased nuclear risk, researchers warn

Researchers warned on Monday that nuclear-armed states were taking their arms out of storage and putting them on delivery systems, as the weapons of mass destruction are playing an increased role in global politics.  

The Stockholm International Peace Research Institute (SIPRI) said the world’s nuclear powers had an estimated total of 12,187 warheads, with about 9,745 of them in stockpiles for potential use.

02:46 AM, 8 June 2026

Iran suspends flights at Tehran international airport: local media

Tehran’s international airport suspended all incoming flights after Iranian missile strikes on Israel, local media said late on Sunday. “The civil aviation authority announced the suspension of all flights bound for the airport until further notice,” said Iranian press agency Mehr — the latest closure for Khomeini International Airport, one of two serving the capital, which had only re-opened in April after being shut for weeks over the Middle East war.

01:24 AM, 8 June 2026

Trump calls for calm, presses Netanyahu for ‘restraint’ after Iran missile attack

US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu spoke by phone as tensions threatened to flare again following Iranian missile attacks on Israel, according to a US official cited by Axios. The reported call came at a critical moment for a fragile ceasefire that Washington has been trying to preserve after weeks of escalating confrontation involving Iran, Israel and US forces in the region.

12:47 AM, 8 June 2026

Israel army says Iran ‘committed grave mistake’ by firing missiles

The Israeli military said Sunday that Iran had committed a “grave mistake” by launching a barrage of missiles at Israel.

“The Iranian terrorist regime has made a grave mistake by once again choosing the path of terror,” military spokesman Brigadier General Effie Defrin.

12:46 AM, 8 June 2026

Israel vows to act across Lebanon, escalate against Hezbollah

The Israeli military vowed to press ahead with its military campaign in Lebanon and said it would step up operations against Hezbollah.

“The (Iranian) regime is attempting to establish a new equation through direct attacks on Israeli territory in response to IDF operations in Dahiyeh,” military spokesman Brigadier General Effie Defrin said, in a televised statement.

“We struck in Dahiyeh in response to Hezbollah’s relentless attacks on the communities of northern Israel. The IDF will continue to operate throughout Lebanon and will intensify its actions against the Hezbollah terrorist organisation.”

12:46 AM, 8 June 2026

Trump urges Israel not to retaliate

US President Donald Trump said he will call Israeli Prime Minister Benjamin Netanyahu to urge him not to retaliate against Iranian missile strikes on Israel, news outlet Axios reported.

“I am going to call Bibi right now and tell him not to retaliate,” Trump was quoted as saying by Axios journalist Barak Ravid in a phone interview, using the Israeli leader’s nickname.

“Each of them had their fun. Israel had its strike and Iran had its strike. We don’t need another one,” Trump said, according to excerpts of which Ravid posted on X.

12:28 AM, 8 June 2026

Iran closes airspace over country’s west

Iran closed the airspace over the west of the country after launching a salvo of missiles towards Israel in response to its latest strike on Lebanon.

“Due to safety and security assessments… the western part of the country’s airspace was declared closed until further notice,” said Majid Akhavan, the spokesman for the National Civil Aviation Organisation, in a statement carried by the news agency IRNA.

GN

The world’s largest importer of oil through the Strait of Hormuz is, paradoxically, also one of the best placed to weather the waterway’s closure.

China consumes oceans of oil from the Gulf and imports roughly as much from the region as India, Japan and South Korea combined. In response to the closure of the Strait, officials across Asia are asking citizens to take shorter showers or work from home to save energy. In China, the ruling Communist Party’s flagship newspaper is instead telling readers the country holds its own “energy rice bowl.”

While the editorial does not mention that Beijing has unofficially banned fuel exports to conserve supplies, the country is nonetheless more insulated than many of its neighbours thanks to years of policy measures that have reduced its vulnerability to energy shocks.

China boasts an electric vehicle fleet about as large as the rest of the world’s combined, vast and growing oil stockpiles, diversified supplies of oil, and gas and an electricity grid that is almost insulated from imports thanks to domestic coal and renewables. 

“The current situation is really close to what Chinese planners have had in mind for decades,” said Lauri Myllyvirta, co-founder of the Centre for Research on Energy and Clean Air in Finland.

“It validates the drive to reduce reliance on seaborne fossil fuels.”

The unexpected EV boom

In late 2020, Beijing issued a goal for electric vehicle purchases to hit 20% of new sales in 2025. By last year, sales hit half of all new vehicles.

That unexpected boom in EVs means China’s fuel consumption has topped out after decades of breakneck growth. The country is burning and importing less oil than it was expected to just a few years ago.

Oil displaced by EVs last year was roughly equal to what China imported from Saudi Arabia, according to estimates from the Centre for Research on Energy and Clean Air.

The EV boom means China imports much less oil

Annual oil consumption displaced by electric vehicles in China

An insulated electricity grid

China’s electricity grid is powered almost entirely by coal and rapidly growing renewable energy. The boom in clean energy, which has exceeded Beijing’s own targets, is such that almost all the extra power the economy requires each year is met with new solar or wind. That means fewer coal imports and less liquefied natural gas (LNG) imported into the handful of coastal provinces where it is part of the electricity mix.

Lots of oil, but many suppliers

China imports lots of oil, but in contrast to other major Asian importers, it is careful to stay independent of any one supplier.

Take Japan: Tokyo normally buys nearly 80% of its oil from Saudi Arabia and the United Arab Emirates. China bought the same share of oil from eight countries, including large amounts of discounted oil from Russia, Venezuela and Iran, which U.S. sanctions place off limits for most buyers.

China keeps its oil imports diversified

Crude oil import volumes by origin for major importers. Less than 20% of China’s oil imports are from any one source.

China also funnels a share of those imports into the storage tanks of its secretive strategic petroleum reserve. No one knows exactly how big the reserves are, but combined with stocks held by commercial refiners, China has enough oil in storage to replace imports via the Strait of Hormuz for perhaps seven months by some estimates.

China has enough oil stored to cover seven months of imports via Hormuz

Domestic production is growing

China produced 4.3 million barrels per day of oil last year, a new record that was equal to about 40% of all oil imports. However, oil reserves are drying up and China is unlikely to replicate the U.S. shale oil boom.

Gas, however, is another story. Domestic production is growing fast enough that, combined with gas imported via pipeline, China is actually importing less LNG than it did in 2020.

China’s pipeline network allows it to diversify away from seaborne imports and source oil and gas from Russia, central Asia and Myanmar. Ambitious plans have been proposed for another Russian-China pipeline, the Power of Siberia 2, however it remains years from completion.

China’s pipeline gas imports have steadily risen since the Power of Siberia

Island neighbors such as Japan or Korea do not share the same geographic advantage

A more secure future

For decades China’s growth has been fueled by fossil fuels imported from overseas, in particular crude oil. But thanks to the EV boom, China is unhitching its growth engine from foreign oil.

“China’s oil demand is likely to peak this year and decline thereafter,” said Chen Lin, vice president of oil and gas research at Rystad Energy. “So although the import share will remain high, the situation is unlikely to worsen.”

Reuters