Modi Warns of Economic Risks from Iran War, Urges Fuel and Gold Cuts
By John Nada·May 11, 2026·4 min read
Modi urges Indians to cut fuel and gold usage amid rising costs from the Iran war. This comes as India faces severe economic pressures and wider trade deficits.
Indian Prime Minister Narendra Modi has called on citizens to reduce fuel use and suspend gold purchases, citing the severe economic impact of the ongoing Iran war. In a public address in Hyderabad, he highlighted the surge in global fuel costs as a significant driver for these measures. Modi's appeal comes as India grapples with rising energy prices that threaten to widen its trade and current account deficits.
India relies heavily on imports for its energy needs, sourcing nearly 85% of its fuel. The country is particularly vulnerable, with about 50% of its crude oil imports passing through the Strait of Hormuz. This strategic chokepoint is crucial, as it also accounts for about 60% of India's liquefied natural gas and nearly all of its liquefied petroleum gas (LPG) supplies. As the conflict in the Middle East escalates, fuel prices have surged, exacerbating the strain on India's economy. Modi's government has maintained retail fuel prices to ease public burden, but the pressure on the rupee continues, trading near an all-time low against the dollar.
In his recent address, Modi urged citizens to use public transport, work from home, and carpool to conserve fuel. This call to action aligns with a growing trend among Asian countries encouraging lower fuel consumption as energy costs climb amid rising geopolitical tensions. President Donald Trump's recent comments regarding Iran's counterproposal to end the war, which he deemed "TOTALLY UNACCEPTABLE!", further dashed hopes for peace and contributed to escalating global oil prices.
The Prime Minister's appeal to cut overseas travel and gold imports is also aimed at conserving foreign currency reserves. India is the world's second-largest gold buyer, spending nearly $72 billion on imports, a figure that underscores the country's dependence on overseas commodities. As high oil prices escalate the country's import bill, shares of Indian jewelry companies and airlines have already begun to feel the impact, with significant dips reported in their stock prices. Shares of Tata group-owned jeweler Titan fell nearly 6% in early trade, while Indian airline IndiGo saw its stock drop by 2.8%. This decline comes at a time when IndiGo is expanding its services on international routes, anticipating that overseas flights will account for 40% of its daily services by 2030.
Economic woes are mounting, with India spending $174.9 billion on crude and petroleum products, which represents about 22% of its total imports in the financial year ending March 2026. This heavy reliance on global oil markets is contributing to the widening trade deficit and current account deficit. Analysts from global brokerage UBS have labeled the ongoing Middle East conflict as a historically large energy shock, characterized by asymmetric macro risks, prompting them to lower India's economic growth forecast for the financial year ending March 2027 from 6.7% to 6.2%.
Despite the looming challenges, former Indian ambassador Nirupama Rao noted that while an immediate economic shock is not anticipated, the country faces difficult times ahead without a resolution in the Middle East. This sentiment underscores the precarious nature of the economic landscape, as both domestic and international factors converge to create uncertainty.
As Modi's administration seeks to stabilize the economy amid rising energy costs, the importance of maintaining a balanced approach to fiscal policy becomes evident. India's chief economic advisor, V. Anantha Nageswaran, recently warned that the country's trade deficit would "rise significantly" in the next financial year ending March 2027. He emphasized that keeping the situation manageable will require burden-sharing among the government, households, and businesses.
The need for proactive measures is critical, as the Modi government, having recently secured electoral victories, may find that tougher economic policies are necessary to navigate these turbulent waters. With the government opting to cut taxes to ease the burden on oil companies and maintain stable pump prices, demand for fuel has remained unaffected thus far. However, these short-term measures may not suffice in addressing the long-term implications of sustained high energy prices on the economy.
The coming months will be pivotal in determining how effectively India can navigate the intertwined challenges of geopolitical conflict and economic stability. As citizens heed Modi's call for reduced fuel consumption and a pause on gold purchases, the government's ability to implement sound fiscal strategies will be tested against the backdrop of fluctuating global energy prices and international political dynamics. The balance between economic pragmatism and public welfare will be crucial in shaping India's economic trajectory in the face of ongoing uncertainties.