Good afternoon, friends. The macroeconomic fallout from the US-Iran war is in focus today, after Fitch trimmed India’s growth forecast on the back of surging energy costs**.**

The big story today: India’s bill to shield the economy from rising energy prices was clocked at USD 13 bn in the first 78 days of the Iran war. On top of that, subsidies on fertilizers in India will expand to another USD 36 bn, double the budgeted allocation.

Plus: Meta has inked a pact with Reliance to build its first dedicated AI data center in Gujarat, while quick-commerce player Zepto is braving the markets and targeting a USD 1 bn listing in Mumbai. Let’s dive right in.

Fitch cuts India growth forecast

Fitch Ratings has lowered India’s FY 2027 GDP growth forecast to 6.4% from 6.7%, citing the economic fallout from the US-Iran war and higher energy prices that are expected to weigh on household spending and business activity, as per its Global Economic Outlook report. The revised projection marks a slowdown from the 7.4% growth estimated for FY 2026.

Rising oil prices and supply disruptions are increasing inflationary pressures, eroding real incomes, and raising operating costs for businesses, Fitch noted. The agency expects higher fuel and energy costs to dampen consumer demand despite continued government spending and infrastructure investment.

Why it matters: India remains particularly vulnerable because it imports the bulk of its energy and has been among the economies most exposed to disruptions in Middle East energy flows. Recent fuel-price hikes have already started feeding into inflation expectations. Fitch joins a growing list of global agencies lowering India’s growth outlook as the war-driven energy shock ripples through the economy.

Defending the INR

The Reserve Bank of India (RBI) will offer a concessional foreign exchange swap facility for new overseas borrowings by state-run companies, lowering hedging costs as it looks to draw more USD inflows and ease pressure on the INR, Bloomberg reports.

The central bank will charge a fixed annual swap premium of 1.5% for borrowings with an average maturity of three years and above. That is lower than the current market cost of FX cover, with forward premiums now at around 2.5-3%.

The facility lowers the cost of protecting overseas loans from a depreciating INR. A state-run company can raise funds abroad and hedge the currency risk through a bank. The bank can then use the RBI facility by selling USD to the central bank in multiples of USD 1 mn with an agreement to buy the USD back when the swap ends.

The timeline: The facility will cover new overseas borrowings raised through 31 December 2026 and will stay open until 15 January 2027. At maturity, the bank will return the INR funds to the RBI and pay the 1.5% annual swap premium.

Why it matters: High hedging costs have made overseas borrowing less attractive for Indian firms, even when external funding is available. By lowering that cost for state-run companies, the RBI is opening another route for USD inflows after the INR hit a record low against the USD last month. For the India-MENA markets, the move comes as India’s currency position remains sensitive to energy-import costs and wider external volatility.

Urals markdown

Indian refiners have regained a price advantage on Russia’s Urals crude for the first time since the Iran war. Urals crude shipped from Russia’s western ports to India’s coast traded at USD 3.9 / bbl markdown to Dated Brent on Friday, providing some price relief to Indian refiners, Bloomberg reports, citing Argus Media data.

The shift: Urals moved below the international benchmark on 29 May for the first time since mid-March. However, on Friday, the Urals grade was priced at a bigger markdown, trading at USD 93.5 / bbl for deliveries along India’s coast. At Russia’s western ports, the average price was USD 73.4 / bbl.

Why it moved: The price advantage returned as Brent stayed below USD 100 / bbl and near-term crude spreads weakened, pointing to a less tight physical market. Lower Chinese buying and higher US exports have also helped absorb part of the Middle East supply shock.

India buying rose: The Iran war helped Russia increase shipments to India, aided by US approval for some purchases of sanctioned Russian barrels to ease market pressure. Russian crude deliveries to India averaged around 1.76 mn bbl / d last month, up 63% from February.

Why it matters: India had already leaned harder on Russian crude in April, when Russia’s share of the country’s crude basket hit an 11-month high, even as refiners paid more for those barrels than for crude from other suppliers. The latest price shift gives refiners more room to negotiate after Russian supply became costlier to secure. It also shows that India’s crude costs remain tied to Gulf supply risk and to Russia’s need to stay competitive in key Asian markets.

Extended duty waiver on petchem imports?

India’s Commerce Ministry is mulling an extension of customs duty exemptions on select petrochemical imports to shield domestic manufacturers from elevated input costs, Business Standard reports.

Why it matters: The government initially waived import duties on 40 petrochemical products back in April to provide a financial cushion for vital downstream industries — particularly pharma, chemicals, and plastics — that have grappled with surging raw-material prices since the outbreak of the war.

Data point

INR 1.05 tn (USD 11 bn) — that is the value of India’s transaction activity in May 2026 across 196 transactions, according to Grant Thornton Bharat’s Dealtracker (pdf). Excluding public market activity, India recorded 190 M&A and private equity transactions worth INR 977 bn (USD 10.2 bn), down 10% in volume and 53% in value from April.

Happening this week

Prime Minister Narendra Modi will visit France and Slovakia beginning Friday, according to an External Affairs Ministry press release. Modi will meet French President Emmanuel Macron in Nice on Sunday, where the two leaders will review the India-France bilateral relationship. He will then visit Slovakia from 14-16 June, marking the first visit by an Indian prime minister to Slovakia since its independence in 1993. Modi will also attend the G7 Summit in Evian on 16-17 June and the VivaTech Summit in Paris on 18 June.

The big story abroad

Geopolitical tensions are escalating once again after the US launched retaliatory airstrikes against Iran. The strikes follow Tehran shooting down a US helicopter over the Strait of Hormuz, with US forces targeting Iranian air defense and radar sites near the strait. “The mission is a proportional response to unjustified Iranian aggression,” the US Central Command said in a statement. The exchange threatens the stability of the already-fragile ceasefire and complicates negotiations for a peace agreement.

Everyone wants a piece of SpaceX: The IPO has so far attracted over USD 250 bn in orders, with investors lining up to get a piece of what is expected to be the largest-ever IPO. The figure is expected to rise further as the company continues its marketing push. The artificial intelligence and spaceflight player was looking to raise USD 75 bn from the offering.

The tech jitters are back: The S&P 500 and Nasdaq Composite closed lower on Tuesday, dragged down by a sector-wide tech selloff as investors shift their focus to defensive sectors. Some think SpaceX has something to do with it, noting that investors are repositioning ahead of the historic USD 1.75 tn listing, further worsening the pressure on mega-cap tech stocks.

Also worth reading this morning: The Wall Street Journal is out with a piece diving into The Future of Work and AI. With insight from 16 economists, the piece looks at what AI means for the economy, employees, and the workplace.

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