India and other major oil-importing nations are expected to increasingly rely on bilateral negotiations to secure energy supplies amid ongoing disruptions in key global transit routes, according to Moody's Ratings.
In its latest report on geopolitical risks, Moody’s flagged that a swift and lasting resolution to tensions between the US and Iran remains unlikely, diminishing prospects of a full reopening of the Strait of Hormuz in the near term. This critical chokepoint for global oil shipments continues to face severe constraints, impacting supply flows worldwide.
The agency noted that while transit volumes may gradually improve, the recovery is likely to occur through fragmented and bilateral arrangements rather than a broad-based reopening. Countries such as India, China, Japan and South Korea are expected to negotiate passage directly with Iran, potentially via coordinated transit corridors emerging near Larak Island and through Omani territorial waters.
However, Moody’s cautioned that a return to pre-conflict traffic levels is unlikely in 2026, with energy transit remaining slow, opaque and vulnerable to further disruptions.
Oil Prices to Stay Elevated
Even if partial access through the Strait resumes within the next six months, global oil markets are expected to remain supply-constrained. Moody’s forecasts Brent crude prices to hover in the USD 90–110 per barrel range for much of the year, with bouts of volatility driven by geopolitical developments.
Sustained high oil prices are expected to have broader macroeconomic implications, including increased input costs, weakened demand and tighter financing conditions for energy-dependent economies and businesses.
India Among Most Exposed Economies
India is likely to be among the most vulnerable to prolonged energy disruptions, given its heavy reliance on Middle Eastern crude. Approximately 46 per cent of the country’s oil imports originate from the region, making it particularly sensitive to supply shocks and price volatility.
The report also highlighted risks stemming from currency depreciation, as well as pressures on India’s current account deficit and fiscal balance in a high oil price environment.
Reflecting these challenges, Moody’s has revised down India’s GDP growth forecast for calendar year 2026 by 0.8 percentage points to 6 per cent.
Global Growth Impact
At sustained Brent price levels of USD 90–110 per barrel, Moody’s estimates that real GDP growth across several major economies could decline by 0.2 to 0.8 percentage points. The impact is expected to vary depending on energy dependence and macroeconomic resilience.
Overall, the report underscores a shifting global energy landscape, where geopolitical tensions are reshaping trade flows, increasing reliance on bilateral arrangements, and sustaining upward pressure on oil prices, with significant implications for growth and financial stability. |
