Introduction: Recent PM’s speech
On 10th May 2026, India’s Prime Minister urged the citizens to adopt to Work from Home (Wfh) facility, reduce travelling, trips, and gold purchases.
Till then, on a surface level, everything felt normal until what came next.
On 12th May 2026, the import duty on gold and silver rose from 6% to 15%. Likewise, similar tweaks were also brought in custom duty and the Agriculture Infrastructure and Development Cess (AIDC).
Which means, this is not a normal guideline followed by a massive tax tweak.
And most importantly, there is a macro impact to be seen in the near future in India.
Keep reading, as we understand why gold and crude oil prices are rising, why the government chooses to increase import duty, what’s happening in the Strait of Hormuz, and its overall impact on us, be it the retail segment or commercial entities.
It matters because it’s been 2.5 months, and the severity is invisible to us.
Why Gold & Crude Prices Are Moving in 2026
The simple answer to why gold prices or crude oil reacted to PM’s speech is “Imports.” At present, India consumes around 800 tonnes of gold per year. Compared to India’s gold production capacity of 1.5 to 2 tonnes, the rest is imported (9-10%) from gold suppliers.
Both gold prices and crude oil prices in India are highly sensitive to global events, geopolitical tensions, currency fluctuations, and government policy signals.
Taking into consideration, the Strait of Hormuz is still not fully operational. Only 18 ships are mobile, which is only 5% of the daily ship transit (approx 60), making it difficult for goods to reach India.
Similarly, India imports nearly 85-89% of its total crude oil requirement from other countries. And since the suppliers reside in the Middle East, the US-Iran war tensions have surged the crude oil prices to reach $106 in 2026. Eventually, India is seeing the consequent effect.
Why Is the Strait of Hormuz So Important?
Nearly 21% of the world’s oil trade and 25% of global LNG trade passes through the Strait of Hormuz. And Qatar being the world’s largest LNG supplier, 100% by-pass happens through this route.
Any disruption in this route can sharply increase global crude oil prices, shipping costs, and inflation risks worldwide.
This is why countries heavily dependent on imported energy are closely watching geopolitical tensions and crude oil market movements in 2026.
Which Countries Are At Risk Due To Rising Crude Oil Prices?
As per the latest details, Asian countries are mostly at risk due to the conflicts at Strait of Hormuz. Here’s is the list:
Sr no. | Country | % dependency |
1 | Japan | 90% |
2 | South Korea | 80% |
3 | India | 60% |
4 | China | 40% |
5 | European Union | 20% |
6 | Africa | 13% |
Key Reasons Why India Increased Import Duty in 2026
In 2026, India’s import duty decisions will be heavily influenced by the ongoing geopolitical tensions and war-related disruptions in West Asia, particularly around Iran and key oil-trade routes.
Let us look at the key reasons why the Indian government increased import duty:
Reason #5 - Rising Crude Oil Prices and Inflation Concerns
One of the huge impacts of the West Asia conflict has been the sharp rise in global crude oil prices. Since India imports nearly ~85% of its crude oil requirements, higher oil prices directly increase the country’s import bill and put pressure on inflation and the Indian rupee.
To manage this economic pressure, the government has raised import duties on certain non-essential and luxury imports such as gold and select consumer goods.
Purpose: Reduce unnecessary dollar outflow and preserve foreign exchange reserves for essential imports like energy and industrial raw materials.
Reason #4 - Protecting Domestic Manufacturing
The recent war-related uncertainty has exposed the risks of depending heavily on global supply chains and volatile regions.
In response, India has continued its focus on “selective protection” under the Make in India strategy.
Likewise, duties on critical raw materials (solar, EVs, rare‑earth‑based components), capital goods, and industrial inputs were lowered (or exempted) this year.
Purpose: To support India in domestic manufacturing, maintain industrial capacity utilisation, and reduce dependency on external markets during global disruptions.
Reason #3 - Managing Fiscal Pressure and Trade Deficit Risks
When these global crude oil prices rise, India’s import bill also increases. But, if the import-dependent consumption falls, the imports also fall.
The math is simple.
Less imports = Few dollar outflows = Money staying within India.
So, even a 30-40 per cent drop in gold imports can save $20-25 billion in a year.
Reason #2 - Reducing Dependency on Volatile Global Markets
To protect domestic industries from cheap imports and external market shocks, India has increased import duties on commodities.
If import duty increases, the consumption demand will reduce, and only selective goods will be imported.
Impact: Eventually, people will reduce their spending habits and help control the inflationary effect resulting from this war.
Reason #1 - Protecting Forex Reserves During Global Uncertainty
Gold imports, rising oil prices, and global volatility together have increased pressure on India’s foreign exchange reserves in 2026.
India’s forex reserves in 2026 fell from a record high of about $728.5 billion in late February 2026 to $690.7 billion by early May 2026. It is almost a decline of roughly ‑5.2% or $38 billion within about ten weeks.
Impact: If the imports tend to rise, India will end up paying more, causing more outflows than inflows. In a situation where FIIs are pulling their money, preserving forex reserves domestically is important.
How Will the Import Duty Hike Impact Gold Prices?
With the recent import duty hike, gold will be more expensive in India almost immediately. Since India imports most of its gold, any increase in import duty directly increases gold prices for buyers.
At the time of writing, 24K gold prices in India were approx ~ ₹15,399 per gram. With the new duty structure, the cost of imported gold rises sharply even before GST, making charges, and jeweller margins are added.
Here’s how much you will pay to buy gold:
Scenario | Duty Rate | Duty Amount on ₹1,53,990 | Final Cost After Duty |
Earlier Structure | 6% | ₹9,239 | ₹1,63,229 |
New Structure | 15% | ₹23,098 | ₹1,77,088 |
Conclusion: What Investors Should Watch in 2026?
For India, both gold and crude oil are crucial in 2026. Since they are heavily imported, even small global events impact domestic fuel prices, inflation, and investor sentiment.
Hence, markets are closely watching crude oil trends, import duty changes, geopolitical tensions, and central bank actions this year.
But remember, markets follow a no-bias rule. These global events will, anyhow, impact our investments; what matters is how we digest the news and interpret it.
Because, “Volatility was never an enemy or friend, understanding it is the key.”
