US dollar index tanks to three-year low
The US dollar index slipped from a one-week high and extended losses ahead of the producer price index data. US dollar index broke under 98- mark and currently trades at 97.61, down 0.55% on the day. It is currently at a three year low. Market is cautious about the US-China trade talks and dollar index is facing significant pressure after recent gains. Powered by Capital Market - Live News
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He added, 'India may also be affected by these global trends mainly through the impact on the contribution of net exports to real GDP growth. If tariff-related uncertainties do not get resolved in the near future, this negative contribution of net exports may gather further momentum.' Srivastava also noted that India's crude oil basket, which had averaged $64.3 per barrel in early 2025-26, could reverse its trend if prices spike again. 'A $10/bbl increase in oil price can reduce real GDP growth by 0.3 percentage points and raise CPI inflation by 0.4 points,' he said. The Reserve Bank of India (RBI), which has reduced the repo rate by 100 basis points since January, may need to reconsider its policy stance if inflation pressures persist. With oil already up over 12% in a single session, will the impact be visible on the household budgets, too? Inflation monster back in focus India's headline inflation had recently eased to 2.82% in May, the lowest since February 2019, all thanks to a favourable monsoon and relatively calm food prices. But with the heatwave back in action in June and the geopolitical situation taking a dramatic turn, that relief may face some risks. Energy prices, especially fuel, play a hidden but crucial role in the pricing of goods and services. Even if petrol and diesel rates remain steady in the short term due to government intervention, the rising cost of transporting goods and services might slowly feed into the inflation cycle. Also Read: Nuclear leak in Iran? Israeli attack on Tehran's nuke sites fuels global anxiety If global crude continues to trend upward, the Reserve Bank of India may find itself under pressure to postpone rate cuts or maintain a tight policy stance. The bond market is already reacting, with yields moving higher in anticipation. 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Fertilisers are essential for agriculture, and any increase in their cost would be passed on to food prices, affecting overall inflation. This could negate the recent price stability observed in food commodities. Also Read: Iran-Israel War: Why Israel bombed Iran's nuclear sites and what it means for global security, oil, and trade Several manufacturing sectors including aviation, chemicals, paints, tyres, cement, and logistics use petroleum-based inputs and fuels. A significant increase in the price of raw materials such as jet fuel, gasoil, or naphtha will result in reduction of profit margins. Crisil Ratings' Senior Director, Anuj Sethi also affirmed that the recent escalation in the Israel- Iran conflict is likely to have repercussions on margins. 'The recent escalation in the Israel- Iran conflict has impacted global oil markets, with crude oil prices surging to over $75/bbl. from the softened levels of $65/bbl. seen during May 2025. The repercussions of this price hike are likely to vary across sectors that are directly or indirectly dependent on crude oil." Also Read: Iran-Israel conflict: How secret friends turned bitter enemies "While a surge in oil prices tends to benefit upstream oil exploration and production companies, the reverse effect may be felt by downstream refiners, whose margins could be squeezed due to higher input costs. Similarly, sectors indirectly linked to crude oil – such as petrochemical-based industries (including packaging films, plastic pipes), man-made yarns, paints, specialty chemicals, and tyres could face margin pressures, in case of further increase in crude oil prices, in the event of escalation of the conflict," he added. Hence, the producers may pass on these costs to consumers or absorb them, both of which have consequences including either reduced affordability for customers or shrink in corporate profits. Ripple effects on consumers The economic stress will be felt on the ground too if the situation worsens. With Iran's warning about paying 'heavy price' to Israel, the transporters might be preparing to revise fares upward. Grocery suppliers and wholesalers expect higher logistics bills. Small business owners, especially MSMEs, may face the shrinking margin problem as their input costs rise while consumer demand stays flat. Gold prices have also reacted to the heightened geopolitical risk. On June 13, domestic gold futures crossed the Rs 1 lakh per 10 grams mark, while global spot prices hovered near $3,383 per ounce. This surge, driven by a weakening rupee and investor flight to safe assets, may take a toll on jewellery sales. Gold jewellery sales in India during April and early May remained subdued, except on the day of Akshaya Tritiya, due to high and volatile gold prices coupled with broader economic uncertainties, according to a World Gold Council (WGC) report. The recent tensions might add to it. While retail jewellery demand may soften, investment demand is expected to remain intact. In this evolving situation, the role of India's policy-makers becomes critical. The RBI may intervene in the currency market to prevent excessive rupee depreciation. It also has to weigh the impact of oil-driven inflation against the risk of a growth slowdown. The central government will have to take a call on whether to cut excise duties, offer targeted subsidies, or rework spending priorities to accommodate rising energy costs. The challenge lies in protecting households from the oil shock without losing control over the fiscal deficit. Key uncertainties ahead Several variables will shape the eventual economic fallout: The geopolitical trajectory : If the Israel-Iran conflict expands, oil could climb further higher. Global shipping lanes : Any disruption, especially through the Strait of Hormuz, would worsen energy costs. Domestic policy : Excise duty adjustments and RBI's rate decisions will determine how deeply inflation spreads. Capital movement : Continued foreign inflows can stabilise the rupee, while outflows could worsen currency pressures. Global interest rates : A strong dollar and high US yields could drive capital away from emerging markets like India. The Israel-Iran conflict may have erupted thousands of kilometres away, but its tremors might be felt across India's economy, from refinery floors to rural kitchens. Oil, often called the lifeblood of the modern economy, carries with it complex consequences when prices spike.
