According to the Finance Ministry's Monthly Economic Review for May 2026, the ongoing disruption in the Strait of Hormuz poses a significant risk to India's economy, particularly concerning inflation and growth. The report emphasizes that prolonged energy supply disruptions could amplify price pressures, critical for the nation's external sector. While India's near-term economic outlook shows "cautious resilience" due to stable domestic fundamentals and strong service exports, the global environment remains challenging due to the West Asia conflict. The review warns that inflation risks are rising, with a notable gap between retail and wholesale inflation indicating building cost pressures. Recent hikes in petrol and diesel prices could trigger inflationary effects, compounded by potential food price increases from a deficient monsoon. Furthermore, India's dependency on energy imports from the Gulf, which constitute a significant portion of total imports, heightens vulnerability to global energy shocks. The report calls for agile policy responses to navigate these external and domestic challenges while maintaining medium-term growth.