'Any hard sanctions by the US may lead to a dramatic decline in Iranian oil exports, which may upset the global supply-demand balance,' Sudhakar Shanbhag wrote in the Economic Times.
'Iran’s oil exports of about 2.2 million barrels per day in 2018 are quite large compared with the available spare capacity of the OPEC.'
Saying that the continued decline in Venezuela output may further aggravate the issue, he said, 'India’s macro position would worsen if oil prices were to shoot above $80. A $10 change in crude oil prices results in about 50 bps impact on CAD and a 25-35 bps impact on inflation.'
If the government slashes taxes on diesel and gasoline to mitigate the impact of higher oil prices, fiscal deficit would widen, the article reads.
'If the above scenario plays out, there is very little macro defense left for Indian investors at this stage for the simple reason that higher oil prices will also keep interest rates at the current high levels, if not higher.'
On May 8, affronting the UN Security Council, the EU, Britain, Russia, China, Germany, France, and the whole world that have supported the landmark Iran Deal, the US President Donald Trump decided to pull out of the Joint Comprehensive Plan of Action (JCPOA), which was the fruit of 12 years of strenuous efforts and talks.
Oil sanction is part of Trump's plan to pressure Iran to give more concessions than what were agreed upon in the JCPOA.
