Tensions are rising in West Asia. A new report from EY warns that India’s small strategic oil reserves could drive inflation. Right now,India’s crude oil stocks can cover domestic needs for only four to five days. That’s a sharp contrast to larger reserves held by countries like China and Japan.
Part of EY’s Economy Watch for May 2026, report says India must boost its reserves of crude oil, fertilizers, rare earth materials, and essential medicines. These steps are crucial to shielding the economy and consumers from global shocks. The ongoing crisis in West Asia is threatening energy supplies, pushing prices up.
According to EY, global crude oil prices recently surged, averaging USD 103.9 per barrel in April 2026—the highest since July 2022 . This spike shows India’s vulnerability to market fluctuations. High oil prices could worsen the current account deficit and inflation. Household expenses will feel pinch.
Given these issues, EY calls for shift in India’s economic policies. The report suggests the government should focus on building larger reserves of key commodities where imports are heavily relied upon. This strategy could better shield consumers from sudden price hikes in petrol, liquefied petroleum gas (LPG),and fertilizers, vital for food production.
Higher fertilizer costs can drive food inflation. Rising crude oil prices hit transportation and electricity bills. EY’s recommendations include keeping adequate strategic reserves of essential goods: (1) crude oil, (2) LPG, (3) fertilizers, (4) processed and unprocessed rare earth materials, and (5) basic medicines and critical medical equipment .
The report also points out need for India to cut its dependence on fragile global supply chains and key trade routes . EY suggests diversifying energy import sources and speeding up the development of alternative trade and transport corridors,like India-Middle East-Europe Economic Corridor (IMEC) and various Indo-Pacific routes. This diversification is crucial for boosting economic security in an unpredictable global landscape.
Alongside these measures, EY urges a quicker transition to green energy and electric vehicles,focusing on domestic energy production. These actions could lessen long-term reliance on imported fossil fuels. They fit into a broader strategy to reshape India’s growth model amid changing global economy.
As the situation in West Asia unfolds, the report makes it clear that economic security is becoming as important as economic growth for large import-dependent nations like India . A proactive approach to managing strategic reserves and diversifying energy sources has never been more urgent.
