The moderation in oil prices saw Indian stock markets close in the green and the Indian rupee paring its losses, closing 54 paise up versus the US dollar at 71.24 on Wednesday.
It is unlikely that even high crude oil prices would push up retail inflation high enough for RBI to put hold on expected interest rate cuts since the price rise effect is expected to be short term.
Uncertainty over the oil situation following a drone attack on Saudi Aramco spooks bourses, forces foreign institutional investors to pull out Rs 800 crore in a single day.
In economic parlance, stagflation means a situation in a country's economy when inflation is persistently high, demand is stagnant and unemployment rates are high.
The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world's top exporter as well as other producers.
The attack on Saudi Arabia’s oil facility, which has taken nearly 5 per cent of global production offline, can have serious repercussions for a world already battling trade wars and a slowing economy.
Indian oil refiners may have to increase retail fuel prices Rs 5-6 per litre over the next fortnight if crude oil price rises by $10 a barrel.
Air India had a loss of Rs 430 crore in the four-month period when Pakistan closed its airspace after the Balakot air strikes.
Aviation Turbine Fuel (ATF) price in Delhi was cut by Rs 596.62 per kilolitre or 0.9 per cent, to Rs 62,698.86 per kl.
Crude prices had fallen from about USD 75 per barrel in April to just USD 66.55 per barrel in June.
Both the US and Iran said that Iranian forces had shot down an American military surveillance drone, but the two sides offered conflicting details on the incident.
It can be noted that the US had on Monday decided to do away with exceptions on sanctions to countries like India who are importing oil from Iran from May 2.
The broader NSE Nifty too slipped 18.50 points, or 0.16 per cent, to close at 11,575.95.
India as a country should strive for a reasonable petroleum pricing which would incentivise both consumers and investors, said B Ashok, MD, Ratnagiri Refinery & Petrochemicals.
The state government had on September 17 reduced its tax on petrol to 28.75 per cent from 32 per cent and diesel to 17.73 per cent from 21 per cent in a bid to give relief to the people.