ISRAEL launched a tit-for-tat attack on Iran on Friday, days after Tehran unleashed drones and missiles on Israeli territory. The development has raised the spectre of a wider West Asian conflict amid the prevailing hostilities between Israel and the Iran-backed militant group Hamas. The reverberations of the Iran-Israel confrontation are already being felt beyond the region, with the benchmark Brent crude price rising to above $90 a barrel before falling a bit. This is a matter of concern for India, which imports over 85 per cent of its crude oil requirements. A steep hike in global oil prices could significantly raise the country's oil import bill and make the rupee depreciate due to the larger outgo of foreign exchange. It's the purchase of cheaper oil from sanctions-hit Russia that helped India reduce its import expenditure over the past year or so.

Supply disruptions caused by geopolitical turbulence have prompted India, the world's third biggest oil consumer and importer, to firm up plans to build its first commercial crude oil strategic reserve. Indian Strategic Petroleum Reserves Ltd, a special purpose vehicle created by the government, has invited bids for constructing an underground storage facility in Karnataka. However, the project is expected to be completed only by 2029-30. In the immediate future, India will continue to be heavily dependent on oil imports. The resilience demonstrated by the country in the face of the Covid-19 pandemic and the Ukraine war is now being put to the test by the shocks originating from West Asia.

India has been quick to express concern over the 'new emerging realities' and has noted that any escalation of hostilities between Israel and Iran will threaten peace and security in the region. A global economic upheaval can be avoided if neutral countries like India impress upon both sides the vital importance of exercising restraint.