Iran War to Weigh More on Indian Growth than Inflation, Keeping Interest Rates Low

This frame grab from a video released by the US Department of Defense on March 4, 2026, shows what the Department of Defense says is periscope footage of a US Navy submarine firing on and sinking an Iranian warship in the Indian Ocean. (Photo by US Department of Defense / AFP)
This frame grab from a video released by the US Department of Defense on March 4, 2026, shows what the Department of Defense says is periscope footage of a US Navy submarine firing on and sinking an Iranian warship in the Indian Ocean. (Photo by US Department of Defense / AFP)
TT

Iran War to Weigh More on Indian Growth than Inflation, Keeping Interest Rates Low

This frame grab from a video released by the US Department of Defense on March 4, 2026, shows what the Department of Defense says is periscope footage of a US Navy submarine firing on and sinking an Iranian warship in the Indian Ocean. (Photo by US Department of Defense / AFP)
This frame grab from a video released by the US Department of Defense on March 4, 2026, shows what the Department of Defense says is periscope footage of a US Navy submarine firing on and sinking an Iranian warship in the Indian Ocean. (Photo by US Department of Defense / AFP)

The US and Israel's attack on Iran is expected to ‌weigh more on India's economic growth than its inflation, which will encourage the Reserve Bank of India to keep interest rates low, three sources familiar with policymakers' thinking and analysts said.

The conflict, which has rippled out across much of the Middle East, has pushed up oil prices by about 15%, disrupted gas flows from the region and triggered selloffs in Indian equity, debt and currency markets, with the rupee hitting a record low and bond yields rising due to concerns about India's current account deficit and the risk of higher inflation.

Despite a weaker rupee and higher crude prices, the central bank is unlikely to take a hawkish turn, all three sources familiar with policy deliberations said.

Current assessments could change, one of the sources cautioned, in case of extreme developments in the Middle East.

The thinking of policymakers appears to have diverged from the market reaction.

Interest rates have risen in emerging and global markets since the Gulf conflict broke out. Traders in India's swap markets have added to bets on at least one rate increase over the next 12 months.

"I don't feel the market has sufficiently priced the risk from oil prices rising significantly and there could be room for swap rates to move even higher ‌if Brent oil ‌holds above $80 per barrel over the next couple of weeks," said Ritesh Bhusari, joint general manager for ‌treasury at ⁠South Indian Bank.

The ⁠RBI's rate-setting panel, which meets for its next policy review in about a month, paused rate cuts at its last meeting in February after reducing the policy repo rate by 125 basis points in 2025.

The sources declined to be identified as they are not authorized to speak to the media. An email sent to the RBI on Wednesday seeking comment was not answered.

Conflict in the Middle East has muddied the picture for central bank policy projections globally. Traders have pushed back wagers on rate cuts by the Federal Reserve while adding to bets on a hike by the European Central Bank.

A rise in oil prices above $100 per barrel or a faster-than-expected pass-through of costs could run the risk of turning global monetary policy more hawkish, according to analysts at Goldman ⁠Sachs.

QUICKER HIT TO GROWTH

An immediate risk to India's growth comes from disruptions to gas supplies.

On Tuesday, Indian ‌companies reduced natural gas supplies to industries in anticipation of tighter flows from the Middle East, ‌a move that could hurt output in sectors including fertilizers and power.

If gas supply disruptions persist for more than four weeks, they could hurt economic growth ‌for at least a quarter, one of the sources said.

If oil prices remained above $90 to $95 a barrel for three to four quarters in ‌a row, the source said, India's expected 7%-plus economic growth in the next financial year would take a more sustained hit.

Under that scenario, growth could slow to about 6.5% from the current expectation for more than 7%, the person added.

Cuts in gas supplies to fertilizer and power companies could reduce output in those sectors in the near term, weighing on growth with a lag in the first and second quarters of the next fiscal year, a second source said.

“If oil prices ‌remain high for an extended period, the ‘Goldilocks phase’ for the Indian economy will end,” the person added.

INFLATION BUFFERS

Inflation, meanwhile, is likely to rise more modestly in the near term.

Retail fuel prices in India ⁠have not moved in tandem with global ⁠crude prices, as fuel retailers often hold prices steady. The government can also cut excise duties to shield consumers if global prices remain elevated, the first source said.

“There is plenty of room on the inflation front,” the third source said. “If inflation were closer to 5%, there might have been a case for a pre-emptive hike, but it is currently near the lower end of the RBI’s tolerance band.”

India's retail inflation was at 2.75% in January, closer to the lower end of the RBI's 2% to 6% tolerance range.

A 10% to 20% rise in global oil prices could lift Indian inflation by 25 to 50 basis points if fully passed through to consumers, according to a Deutsche Bank estimate. With a partial pass-through, consumer price inflation could rise to the 4.5% to 5% range, it said.

“If the fiscal authorities keep retail pump prices unchanged, the RBI would be less worried about near-term inflation risks and focus more on downside growth risks,” Citigroup chief India economist Samiran Chakraborty said in a note this week.

“This could perversely make the policy stance less hawkish than what the immediate market reaction to higher oil prices might suggest,” he said.

However, the central bank may also be constrained from delivering more rate cuts if oil prices remain elevated.

“While the RBI is unlikely to hike rates, if inflation were to rise towards 5% due to higher oil prices, it would also be unlikely to cut rates to support growth in such a scenario,” Deutsche Bank chief India economist Kaushik Das said.



IMF Praises Saudi Economy’s Resilience

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)
TT

IMF Praises Saudi Economy’s Resilience

The Saudi capital, Riyadh (Reuters)
The Saudi capital, Riyadh (Reuters)

The International Monetary Fund (IMF) affirmed that the Saudi economy has demonstrated high resilience in the face of regional geopolitical tensions that have obstructed navigation in the Strait of Hormuz.

The Fund praised the Kingdom's ability to contain the fallout from the navigation disruption through a swift logistical response, which involved redirecting oil shipments towards the East-West pipeline and Red Sea ports, leveraging the legacy of its Vision 2030 structural reforms.

“The Saudi economy is demonstrating agility and resilience, supported by robust and diversified infrastructure and the authorities’ concerted efforts to redirect shipments and ease logistical bottlenecks,” mission head Azim Sadikov said on Wednesday in the IMF's latest Article IV mission report following a visit to the Kingdom from April 28 to May 13.

“A prompt rerouting of oil through the East-West pipeline and Red Sea ports, combined with Aramco’s overseas inventories, has helped limit the drop in oil deliveries," it said.

"Saudi Arabia's strong fundamentals—low government debt, ample reserves, and a large sovereign wealth fund—provide important buffers,” the report added.

“Assuming maritime shipments through the Strait of Hormuz normalize in the coming months, a recovery could take hold, with growth this year notably lower but holding up at about 2 percent. Non-oil activity would be supported by domestic demand, underpinned by stable public employment, government spending, and the steady execution of private and public capital projects. Average inflation is projected to increase to about 2.3 percent as higher shipping and insurance costs add upward pressure on prices. Higher oil prices are expected to offset volume losses, generating a windfall that would reduce the current account and fiscal deficits in 2026.”

In its April 2026 World Economic Outlook, the IMF projected Saudi Arabia’s real GDP growth at 3.1% for 2026, 1.4 percentage points lower than a January estimate. It had said that the Kingdom was expected to be less severely affected by the war.

In the Outlook, the IMF also upgraded Saudi Arabia's 2027 GDP growth forecast to 4.5%, a 0.9% increase from previous projections. This upward revision reflected anticipated normalizations in energy output and logistics.

In Wednesday’s report, the IMF said given the Saudi economy’s resilience, “the mission considers that a modest reduction in the non-oil primary deficit in 2026 remains appropriate, with spending reprioritization as the first line of action to accommodate any fiscal response to the conflict.”

The report lauded Saudi Arabia's strong fundamentals—low government debt, ample reserves, and a large sovereign wealth fund— that provide important buffers.

It said that should the shock prove more prolonged, Saudi Arabia has the space to loosen the fiscal stance to cushion the economy, with support to affected businesses and households that should be temporary, targeted, and transparent.

As the economy normalizes, an ambitious medium-term fiscal consolidation anchored on non-oil revenue mobilization and spending rationalization is needed, it said.

On the banking sector, the IMF said: “The peg to the US dollar provides a credible monetary policy anchor and helps underpin financial stability, particularly in the current environment of heightened uncertainty.”

“The banking sector is well-positioned to weather the shock, supported by strong capital and liquidity buffers,” it added.

The mission welcomed the efforts of the Saudi Central Bank (SAMA) to step up the monitoring of liquidity, credit conditions, and asset quality. It also supported “SAMA's decision to proceed with the implementation of the 100 basis points countercyclical capital buffer, its proactive approach to containing risks from FX borrowing, and continued progress in strengthening its resolution and emergency liquidity assistance frameworks.”

The report added: “Ten years since its launch, Vision 2030 reforms have helped strengthen institutions and improve policymaking, boosting economic performance and reducing dependence on oil.”

“Sustaining the reform momentum to remove remaining impediments to diversification and to expand the role of the private sector will be key to maintaining strong growth prospects for the medium term,” it said.

In this regard, the IMF lauded PIF's recalibrated 2026–30 strategy, with its shift toward more selective capital allocation and greater private-sector crowding-in.

The report called for “improving the business environment, deepening capital markets, supporting small and medium enterprises, aligning education with labor market needs, strengthening governance, and scaling AI adoption while mitigating associated risks.”


Cisco Says Networks Are Core to AI, Saudi Arabia Faces Readiness Test

Cisco CEO Chuck Robbins delivers the opening keynote before tens of thousands of attendees. (Cisco)
Cisco CEO Chuck Robbins delivers the opening keynote before tens of thousands of attendees. (Cisco)
TT

Cisco Says Networks Are Core to AI, Saudi Arabia Faces Readiness Test

Cisco CEO Chuck Robbins delivers the opening keynote before tens of thousands of attendees. (Cisco)
Cisco CEO Chuck Robbins delivers the opening keynote before tens of thousands of attendees. (Cisco)

Cisco used its annual Cisco Live 2026 event to present artificial intelligence as a new test for infrastructure, not merely a software wave or a move toward smarter applications.

The main message at the event was that as organizations move from chatbots to AI agents capable of carrying out tasks, networks, security, observability, identity, and digital resilience are becoming part of one operating equation.

That idea featured strongly in the keynote speech by Cisco Chair and CEO Chuck Robbins, who returned to the company’s history in networking to explain that the power of any technological revolution is not complete unless its elements are connected to one another.

He said models, graphics processing units, applications and agents are all important, but they become more powerful when linked through a network capable of supporting and securing them.

He noted that network traffic linked to AI could triple over the next three years, as robots, manufacturing and physical AI enter operating environments.

One platform to run and defend infrastructure

The most prominent announcement at Cisco Live 2026 was the launch of Cisco Cloud Control, a unified platform to manage, monitor and secure technology infrastructure, designed so humans and AI agents can operate in the same environment and rely on the same operational data.

Cisco says the platform brings together networking, security, computing, observability and collaboration in a single interface. It allows users to build applications and agents using natural language and connect them to an ecosystem of external tools.

The company describes the platform as the operational foundation for its Agentic Ops vision, meaning infrastructure operations assisted by agents capable of detecting problems, analyzing their causes, proposing fixes, testing changes before they are implemented and then confirming that the user experience has returned to normal.

Jeetu Patel, Cisco’s President and Chief Product Officer, said AI agents reason and act continuously at software speed, and that changes everything about how we scale, manage and defend critical infrastructure.

He said the platform serves as a command center for agentic AI, where human teams and AI agents operate in the same environment and share the same information, while humans remain in control.

Saudi Arabia and the difficult readiness test

Asked by Asharq Al-Awsat about the biggest readiness gap facing Saudi organizations as they move toward agentic AI, and about the role Cisco wants to play in closing that gap, from secure connectivity and observability to identity, governance and skills, Robbins said the challenge is not limited to Saudi Arabia alone, but is linked to every organization’s effort to balance the desire to move quickly with maintaining a trusted security posture.

He said organizations are trying to understand the “fine line” between benefiting from new AI capabilities and dealing with the trust and security issues everyone knows are present.

On the same issue, Patel said the readiness gap in markets such as the Middle East is not only about the strategic decision to adopt AI, but also about the complexity of building the infrastructure itself.

These projects, he said, need time because every stage carries a level of complexity, from securing power, obtaining permits and preparing the right architecture, to managing data movement and capacity inside data centers so the infrastructure is not placed under pressure beyond its capability. Government regulatory requirements also enter the equation, making large-scale AI projects complex undertakings rather than a matter of buying ready-made technology.

Patel said, however, that the pace of movement in the Middle East has become faster than he would have expected a few years ago. He pointed to “significant momentum” in the region and said Cisco leaders had visited it several times and planned to return in the coming months, signaling continued work with its markets.

Liz Centoni, Cisco’s Executive Vice President and Chief Customer Experience Officer, linked the readiness gap in her remarks to Asharq Al-Awsat to two main areas.

The first is that organizations can no longer view infrastructure devices as ordinary operating assets, because these devices have become central to a new generation of attacks. Owning the technology is therefore not enough.

Organizations must change their internal operating model, especially how they handle vulnerabilities and security updates. Patching cycles that once took days or months are no longer suitable, and organizations may need to move toward a response measured in hours, or perhaps minutes.

The second area is quantum readiness. Centoni pointed to the risks of “harvest now, decrypt later” attacks, in which encrypted data may be collected today in the hope of decrypting it later as quantum computing advances.

She said many organizations may not even understand the level of their exposure to this type of risk and may be surprised by the results of quantum readiness assessments when they discover weaknesses in their current infrastructure.

The network is no longer a technical background

In a special interview with Asharq Al-Awsat on the sidelines of the event, Gordon Thomson, Cisco’s President for Europe, the Middle East and Africa, said the biggest change in the move from chatbots to agentic AI is that organizations are becoming more dependent on the network than ever before.

He said AI agents may not be in the same location. They may operate from desktops or small computers, inside data centers or across multiple cloud environments, making the network’s performance, reliability and security decisive factors in achieving returns from AI.

AI moves the world, but Cisco moves AI, according to Thomson, referring to the network as the layer that connects models, agents, systems and users.

Thomson added that GPUs are important, but they need a network to connect them, and that network is often built on Cisco technologies or on Ethernet. In this sense, he does not see the network as a silent technical layer, but as a foundation for operating AI itself, whether inside Saudi Arabia or beyond.

On the gaps that hinder the adoption of agentic AI, Thomson distinguished between infrastructure, trust and data, but said differences between Europe, the Gulf and Africa may not be geographical as much as sectoral. Government entities, banks, telecommunications companies and industrial sectors may approach trust, governance and security in different ways.

But he said what he sees in the Middle East and Saudi Arabia is a growing awareness of the importance of data, and clear investment in observability technologies and in understanding what is happening inside digital environments.

That point shifts the discussion from “Do we have the data?” to “Can we use it to operate AI safely?” Organizations may have vast amounts of data, but they need to link it to an operational context and understand what is happening across networks, applications, devices and agents.

Security as a layer inside the infrastructure

Cisco’s announcements in Las Vegas reflect a clear conviction that security is no longer a layer added after infrastructure is built but must be part of it from the beginning. The new platform brings together data from networking, security, observability, and collaboration, allowing humans and agents to work on the same context.

The company is also expanding Live Protect to shield its products from new vulnerabilities during operation, without rebooting, upgrading or opening a maintenance window.

According to Cisco, this approach is linked to the collapse of the time between vulnerability discovery and exploitation from weeks to minutes. The company also says reactive defense is no longer enough in an environment where attacks can accelerate with the help of advanced AI models.

The announcements also include Hybrid Mesh Firewall, which expands protection across networks, applications and firewalls from Cisco and third parties, with the aim of reducing the scope of damage when an incident occurs. On agents, Cisco speaks of protecting agents from the outside world and protecting enterprise resources from the agents themselves, through tools such as AI Defense, Zero Trust for agents and Agentic SOC.

Thomson said Cisco is not speaking only about delivering AI but about delivering “secure AI.”

He said the issue is about defining policy, enforcing it, and having the ability to mitigate the impact of any exposure or problem when it occurs. He said this is what Cisco brings to the table, drawing on its ability to capture data and use it to address customer challenges.

Is this a boardroom issue?

One notable shift in Cisco’s language this year is its move to take the network out of the category of invisible infrastructure and place it in the category of strategic risk. In his meeting with Asharq Al-Awsat, Thomson said that every company’s infrastructure has now become digital infrastructure, and that boards are beginning to understand that “the things that connect everything” are important and vital to business continuity.

He said the central issue boards must consider is digital resilience, adding that Cisco’s purchase of Splunk came in the context of using data more effectively to support it.

He said a conversation with a board 12 or 18 months ago about the importance of the network might not have received the same attention. Today, however, any board understands the importance of the network and the need to protect it, modernize it, and improve its reliability.

This point leads directly to Saudi Arabia and the Gulf, where government services, energy, transport, smart cities, health services and financial services are being transformed into interconnected digital systems. In such environments, a network outage is not a technical problem inside a server room, but a matter of service continuity, trust and operations.

From abundant data to decision-making power

Cisco places observability and data at the center of its new message. Cisco Cloud Control not only provides unified visibility, but relies on cross-domain telemetry, meaning the collection of operational data from networks, security, applications, users and agents, and linking it in one context.

The goal is for humans and agents to work on the same information to address issues such as uptime, agent behavior, and tokenomics.

In Gulf markets, this discussion does not appear theoretical. Large organizations in Saudi Arabia, especially in regulated sectors, need to link speed with control. AI agents may soon enter customer service, security, network management, data analysis, supply chains, programming, and internal operations.

But the question is not only what an agent can do, but who allowed it to do so? With what authority? Under what policy? And how can what it did be known later?

For this reason, Thomson stressed that the Zero Trust approach is essential, saying that everything starts there, with identity and privileges built on top, so that no user or agent gains access except through the required privileges and credentials.

Quantum security: Tomorrow’s threat enters today’s agenda

Cisco dedicated part of its conference announcements to the post-quantum computing track, pointing to “harvest now, decrypt later” attacks, in which encrypted data is collected today in the hope of decrypting it later as quantum capabilities develop.

The company said it is committed to enabling quantum secure communication capabilities across most of its core portfolio by December 2026, with the launch of a new series of routers, switches, and firewalls equipped with quantum safe secure boot, as well as Quantum Ready Assessments through Cisco IQ to identify the assets most exposed to these risks.

This does not mean every organization needs to change its infrastructure immediately, but it reflects a shift in thinking.

Organizations building AI infrastructure today in long-life sectors such as energy, government, telecommunications and finance cannot separate their current decisions from risks that will emerge over the coming years. Quantum readiness, therefore, becomes part of a broader concept of digital resilience.

The Middle East between speed and sovereignty

In the Middle East, three factors intersect to make Cisco’s message more relevant to the region: the speed of investment, the sensitivity of data and the need for sovereignty.

Saudi Arabia, in particular, is moving from the stage of announcing strategies to the stage of building infrastructure, operating it and linking it to sectors. But this shift raises questions about where data is operated, who has the right to access it, how agents are monitored, and which model is most appropriate for cloud, on-premises infrastructure, or hybrid environments.

In his remarks to Asharq Al-Awsat, Thomson did not see differences between the Middle East and Europe as always geographical in nature, but he acknowledged that priorities may differ.

The region is moving quickly and has clear ambition, but that increases the importance of control, resilience, and security. Sovereignty, from this perspective, becomes more than a question of where data is stored. It is also linked to control over infrastructure, operating choices, the ability to recover and trust in the support chain.

The test of the next phase

What emerged from Cisco Live 2026 is an attempt to redefine the network’s role in the age of AI. The network is no longer a silent background, nor merely a transport layer. The company says the network is becoming the place through which agents’ decisions pass, policies are enforced, data is captured and resilience is measured.

For Saudi Arabia and the Gulf, this vision carries a clear significance. The next phase of AI will not be measured only by the size of data centers, the number of processors, or the speed at which services are launched, but by institutions’ ability to operate this system securely, reliably and resiliently.

As AI systems move from answering to acting, the infrastructure that connects, protects and monitors them becomes part of strategic decision making, not merely a technical detail.


Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
TT

Saudi Aramco: Oil Refining Has Been Underinvested

FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: Saudi Aramco logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The current oil supply crisis shows there is underinvestment in oil refining as demand holds resilient, Saudi state-owned Aramco's vice president of market analysis and sustainability, Musaab Al Mulla, said on Tuesday.

Around 3 ⁠million barrels per ⁠day of refining capacity closed between 2020 and 2023, Al Mulla said at the S&P Global Energy Middle East ⁠Petroleum and Gas Conference in London.

"Now we realize if you have those refineries you may have definitely mitigated the impacts of the crisis today," he said.

The war in Iran, attacks on energy infrastructure and ⁠Iran's effective ⁠closure of the Strait of Hormuz followed by a US naval blockade, have removed around 14 million bpd of oil supply from Middle East producers to the global market.