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India braces for Iran oil shock

Markets tank on oil woes, but that's just the tip of the iceberg

An Iran oil shock could hit India's economy hard, writes FirstPost. The market is already pricing in the risk of higher inflation and slower growth, with a major plunge this week.

"...India faces a ‘triple whammy’ arising from its vulnerabilities on three counts – its current account deficits, its fuel subsidies, and budget deficits. And any escalation in Iran-Israeli tension, which has already sent crude oil prices edging up," FirstPost explains. "In particular, rising oil prices could worsen current account balances, and an expanding current account deficit could lead to currency weakness and force domestic rates higher to fund the deficit."

Yesterday, the benchmark Sensex shed 450 points (or around 3 percent) on fears that higher oil prices would hit India's efforts to rein in inflation, according to Moneycontrol.com. It was the Indian market's biggest drop in nearly six months, and belied hopes of an untroubled rally preceding the announcement of the budget in March. 

So does that mean India's more likely to stay the course in its opposition to U.S. sanctions -- or more drastic action -- against Iran? Yep.

http://www.globalpost.com/dispatches/globalpost-blogs/india/india-iran-oil-shock