Harvard University professor and former IMF Deputy Managing Director Gita Gopinath has warned that the ongoing Gulf conflict has triggered the biggest oil shock in decades, with the potential to hit global growth, inflation, and household finances if it drags on.

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She said the scale of disruption is unprecedented in recent history. "This is serious. It's the biggest oil shock to the world. It's bigger than what we saw during the 1970s," she said in an exclusive interview with India Today TV. She said even without further supply restrictions, "this is the largest shock that the world has experienced."

Gopinath said the global outlook hinges on how long the conflict lasts. If it is resolved quickly, the economic impact could be limited. "If everything gets resolved in the next week or so, we're talking about global growth being lower by about .3 percentage points," she said, citing IMF forecasts.

But a prolonged conflict could have far deeper consequences. If oil prices rise to around $100 per barrel, global growth could fall to 2.5%, down sharply from a projected 3.4% without the conflict. 

Pressure on fuel, inflation and rupee

When asked about fuel prices going forward after the elections are over, Gopinath said India cannot shield consumers from rising prices indefinitely, warning of growing fiscal strain.

"I don't think it's sustainable for the Indian government to continue to subsidise fuel prices for a very long time. It's not sustainable," she said, adding that some increase will eventually be passed on to consumers - "may not be the full amount, but certainly more than what's happening at this moment."

On fertilisers, she pointed to a temporary buffer from existing contracts. "They have some long-term contracts that help in the interim," she said. But a disruption in supply routes would be more damaging. "If there's going to be just this blockage of the Strait of Hormuz, then you're not even going to get the supplies. And I think that's the bigger damage."

The risks, she said, go beyond commodities. "If this continues for much longer, it's usually not just food, fuel, and fertilizers. The problem is that financial conditions could tighten much more than what we've seen right now, including the pressure on the rupee."

Key pressure points

For India, the strain is already visible in its external balances. "The immediate impact for the Indian economy is what's happening with the current account, the balance of payments, the pressure in terms of the impact on the rupee," Gopinath said.

Higher oil prices would widen the current account deficit, particularly at a time when capital inflows remain weak. "Given that there's not that much appetite for foreign capital coming into India at this current moment, that's where the pressure is."

Published on: Apr 23, 2026 6:30 AM IST