Good afternoon, readers. The war in the Middle East is triggering a significant recalibration in India’s energy markets as the Indian government invokes emergency powers to cut gas supplies to industrial customers. On the oil front, India is so far benefiting from a US sanctions waiver, with refiners scooping up 30 mn barrels of Russian crude.

Plus: India’s foreign minister has called for de-escalation in the conflict as the fallout from the war starts to impact the economic outlook.

Watch this space

OIL WATCH — India has reportedly rejected the International Energy Agency (IEA) proposal to release its 5.3 mn strategic oil reserves to the global oil market amid a steep hike in crude oil prices and supply disruptions in the GCC, Reuters reports, citing government sources.

Not our problem: The Indian government maintains that the crisis driving up prices is not their creation, insisting that the responsible parties must resolve the issue and bring costs down, government sources told Times of India. The government is likely to hold firm to its “India first policy,” the daily adds.

Why it matters: G7 finance ministers and the IEA held an emergency meeting this week to discuss a massive and coordinated release of strategic oil reserves, according to Bloomberg. India is not a member of the IEA and has no treaty obligations to release its reserves in coordination with the international community.

CAPITAL MARKETS —ICICI Asset Manager bridges India-GCC capital flows: ICICI Prudential Asset Management, one of India’s largest asset managers, rolled out its new office in Dubai International Financial Center (DIFC), targeting institutional and wealth investors across the GCC and Africa, according to Dubai Media Office. The new base will act as a hub for family offices, wealth funds, and private banks seeking exposure to Indian equities, fixed income, and multi-asset investments.

IN CONTEXT- The Middle East has been emerging as a hot investment base for India, bolstered by a raft of agreements inked earlier this year. The Abu Dhabi Investment Authority bought an undisclosed stake in ICICI Prudential Asset Management at the end of last year as part of a pre-IPO placement.

IT SERVICES — India’s technology industry body is urging companies to ramp up operational preparedness and cybersecurity as war escalates in the Middle East, as per an advisory by the National Association of Software and Service Companies (Nasscom). Business operations remain stable for now but there are risks of “sector-wide” disruption, cyber intrusions, and disinformation campaigns due to geopolitical uncertainty, Nasscom said.

Why it matters:Vulnerabilities in third-party vendors with Middle East exposure could trigger disruptions in the wider tech ecosystem, Nasscom warns, as Indian IT firms are vital to the Gulf economy. A breach could hurt service providers but also halt the execution of major projects and banking operations in the UAE and Saudi Arabia.

Sign of the times

INVESTMENT WATCH —India has eased foreign direct investment rules for countries sharing its land borders, the Press Information Bureau said. The rule previously mandated government approval for any investment from neighbouring nations, primarily aimed at China.

IN CONTEXT- India introduced the curbs after the 2020 border clash with China, which triggered a broader tightening of economic ties including bans on more than 200 Chinese mobile apps and heightened scrutiny of Chinese capital. Since 2020, capital flows from China essentially froze as hundreds of applications languished without resolution or were rejected.

What’s changed: The revised policy allows non-controlling investments up to 10% from land-bordering countries without government approval, subject to disclosure. Larger investments in key manufacturing sectors like electronic components, capital goods, and solar cells will be fast-tracked within 60 days if the majority shareholding and control remains with Indian citizens or entities at all times.

Why it matters:The easing is a tentative economic recalibration by New Delhi as it balances national security concerns with the need to attract capital and sustain industrial supply chains tied to Chinese manufacturing ecosystems. Critical sectors like EVs, electronics, and pharma, where India is heavily dependent on Chinese components, could likely see more interest through joint ventures and direct investment.

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Data point

8.2% — That is India’s share in the total amount of global arms imports, making it the world’s second-largest arms importer in 2021-25, as per a report by the Stockholm International Peace Research Institute. Imports were driven by security tensions with China and Pakistan, though the country’s overall arms purchases declined 4% compared to 2016-20.

Supplier shift: Russia remained India’s largest supplier, but its share fell sharply from 70% in 2011-15 to 40% in 2021-25, reflecting New Delhi’s gradual pivot toward Western partners such as France, Israel, and the US, alongside a push for indigenous defence manufacturing.

The big story abroad

It’s another morning with the front pages all about the US and Israel’s continued campaign against Iran, which saw the most intense night of aerial bombardment on Tuesday. Earlier today, Iran retaliated by launching attacks on central Israel and US military sites in Bahrain.

That said, Washington urged Israel not to launch further strikes on Iranian energy facilities, especially oil infrastructure, three unnamed sources told Axios. The Trump administration reportedly argued that such attacks would harm the Iranian public and jeopardize future US cooperation with Iran’s oil sector post-conflict. Washington also cautioned that these strikes could provoke retaliatory strikes against Gulf allies and their own energy sites.

Meanwhile on Wall Street: Microsoft has cemented its support for Anthropic’s lawsuit against the Pentagon, arguing that moves to punish the AI startup would be detrimental to the broader US tech scene.

Market watch

CURRENCY— Aggressive intervention: The Reserve Bank of India (RBI) is rapidly expanding its intervention across both currency and bond markets as rising oil prices could push inflation, widen the trade deficit, and put government revenues under stress, Bloomberg reports, citing analysts and traders.

Burning bns: Late Friday, the RBI announced a USD 10.9 bn open market bond purchase for this month to replenish liquidity and cap borrowing costs. This follows an estimated USD 18 bn to USD 20 bn the central bank sold in forex markets last week to prop up the sliding INR, analysts told Bloomberg.

The INR’s Slide: The geopolitical crisis has pushed the INR to record lows, breaching 92 to the dollar. Despite holding record foreign exchange reserves of USD 728.5 bn at the end of February, the RBI is being forced into a delicate balancing act to steady the currency without depleting its war chest.

Zoom out: Don't expect a relentless defense of the currency at any cost, as the central bank is likely to conserve its forex reserves given the uncertainty over how long the war will last.

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