Goldman Sachs Cuts India Growth Forecast To 5.9% Amid Iran-US War, Oil Shock

Global investment bank Goldman Sachs has lowered India's economic growth forecast for calendar year 2026 to 5.9 per cent, down from its earlier estimate of 7 per cent, citing rising geopolitical tensions and a prolonged oil market shock triggered by the Iran-US conflict.

The downgrade comes as disruptions in global crude supply, particularly through the Strait of Hormuz, raise concerns over inflation, trade costs and domestic demand. Analysts say restricted tanker movement through the key oil transit route is tightening supply and pushing prices higher, creating pressure on energy-importing economies like India.

Goldman Sachs expects Brent crude prices to stay elevated in the near term, averaging around $105 per barrel in March and rising further to about $115 in April, before gradually easing towards $80 by the final quarter of 2026. However, the near-term spike is expected to keep imported inflation high and limit the Reserve Bank of India's ability to ease monetary policy.

The bank has also flagged that disruptions in the Strait of Hormuz could continue until mid-April, with supply conditions normalising only in the following weeks. This extended period of uncertainty in oil markets is a key reason behind the downward revision in India's growth outlook.

The geopolitical situation worsened after the reported killing of Ali Khamenei in a joint US operation, escalating tensions across the Middle East and stalling tanker movements. The conflict has heightened energy security concerns globally, particularly for major importers such as India.

The impact is already being felt domestically, with LPG shortages reported in several cities and households facing supply issues or paying higher prices in informal markets. At the same time, the rupee has weakened to record lows, increasing the cost of imports and adding to inflationary pressure, even as some exporters see limited benefits.

Oil prices have remained volatile, briefly falling nearly 10 per cent after Donald Trump held back planned strikes on Iranian energy infrastructure. However, analysts warn that such short-term relief does little to change the broader risk outlook.

With elevated oil prices squeezing corporate margins, raising import bills and dampening consumption, Goldman Sachs believes India's growth will face sustained pressure through 2026 unless global energy markets stabilise sooner than expected.