Tension in Middle East poses significant risk to rupee and country’s growth rate: Report!

Tensions in the Middle East pose little risk to the rupee’s devaluation and the country’s growth rate. This information was given in a report released on Thursday. In a report issued by asset management company Shriram Wealth, it was said that due to increasing tension in the Middle East, there may be a rise in defense stocks and precious metals.

The report further said that a 10 per cent rise in crude oil prices, as estimated by the RBI, could lead to an increase of 30 basis points in inflation, but its impact on rupee devaluation and growth would be much less.

According to the report, a 5 percent fall in the rupee could lead to an increase in inflation by 35 basis points, but it could lead to an increase in GDP growth rate by 25 basis points.

According to the firm, the fall in the value of the rupee is likely to be limited due to RBI’s foreign exchange intervention.

“Additionally, an easing of existing tensions should help stabilize the local currency. Based on these projections, we see limited impacts of oil prices on domestic inflation and the growth outlook,” the report said.

The report said that the RBI’s base estimate for crude oil in the second half of FY 2026 was $ 70 per barrel and Rs 88 against the dollar. The average price of Indian crude oil in the second half of FY 2026 is $ 65 per barrel and the value of rupee against the spot dollar is $ 89.5.

The report also notes that India’s overall macro economic factors, such as foreign exchange reserves of over $700 billion, manageable trade and current account deficits, low inflation and interest rates, and controlled fiscal deficit, remain in a fairly strong position, underpinning the broader economy.

Crude oil-dependent sectors such as chemicals, paints, pharma, airlines, tires and OMCs may face margin pressure, while companies with significant business in the Middle East may face operational and earnings risks.

“The defense sector is likely to benefit from an improving market environment amid an increase in global defense spending. Any further escalation in conflict is likely to support gold and silver prices in the near term, which will be positive for gold and silver ETF investments,” it said.

The Middle East is home to about 9 million Indians, contributes 38 percent of remittances, and the region accounts for 15 percent of India’s exports and 21 percent of its imports.