Oil prices surged by 2% in early trading today following US strikes on Iranian nuclear facilities, escalating tensions in the Middle East. The strikes, reportedly targeting three key nuclear sites, have triggered concerns about potential disruptions to oil supply routes and broader regional instability. India, a major oil importer, is closely monitoring the evolving situation and its potential impact on the Indian economy.

The US strikes have heightened concerns surrounding the Strait of Hormuz, a critical oil shipping lane through which a significant portion of India's crude imports pass. Disruption to this route could lead to a sharp increase in shipping costs and drive up domestic inflation.

India relies heavily on imports for its crude oil and LNG needs, making it vulnerable to fluctuations in global oil prices and supply disruptions. Rising oil prices could widen India's current account deficit, increase energy costs, and potentially lead to investor risk aversion and capital outflows.

The Indian stock markets are also expected to face pressure this week due to the escalating tensions. A possible shutdown of the Strait of Hormuz by Iran could further weigh on market sentiment, potentially leading to a gap-down opening. Experts suggest that the market's response will depend on how Iran manages the situation, with any further escalation likely to have a sharply negative impact.

Despite these concerns, some analysts believe that the impact on India may remain contained unless the conflict escalates significantly. India has been diversifying its sources of oil imports in recent years, with a significant increase in imports from Russia and the United States. This diversification strategy aims to reduce India's reliance on Middle Eastern oil and mitigate the impact of potential supply disruptions.

Prime Minister Narendra Modi has spoken with Iranian President Masoud Pezeshkian, expressing deep concerns over the developments and calling for immediate de-escalation. Modi reiterated India's commitment to dialogue and diplomacy as the way forward for restoring regional peace, security, and stability. India, with its friendly relations with both Iran and Israel, could potentially play a crucial role in de-escalating the conflict through diplomatic efforts.

The Indian government has also refuted claims circulating on social media that the US used Indian airspace for the strikes on Iran, dismissing these claims as fake.

Market analysts anticipate that oil prices may surge past $80 a barrel in response to the conflict, with potential for even higher prices if the Strait of Hormuz is disrupted. The long-term impact on India's economy will depend on the duration and intensity of the conflict, as well as India's ability to manage its energy supplies and maintain stable trade relations with the region. The government is closely watching the situation and is prepared to take necessary measures to ensure the country's energy security and economic stability.