India announced a 3-rupee ($0.03) per litre fuel price hike on Friday, with gasoline now priced at 97.77 rupees ($1.02) and diesel at 90.67 rupees ($0.94), according to Al Jazeera. The move aims to offset losses caused by supply disruptions linked to the ongoing conflict between the US and Israel with Iran.

Impact on Transportation and Airline Sector

Air India has significantly cut its international operations, reducing around 100 daily flights to destinations like San Francisco, Paris, and Toronto. With fuel prices hitting $162.89 per barrel for the week ending 8 May 2026,up from $99.40 at the end of February,airlines are facing severe financial strain. Fuel accounts for up to 40% of an airline’s operating costs, and Air India has already incurred losses exceeding Rs 20,000 crore, according to The Economic Times.

Air India’s CEO. Campbell Wilson. Told employees that the airline would continue to reduce international services as airspace restrictions and high fuel prices have made many routes unprofitable. The closure of Pakistani airspace has forced Air India to take longer routes, increasing fuel consumption and crew costs — Flights to North America now stop in Vienna or Stockholm, adding to expenses.

Modi’s Call for Fuel Saving and Austerity

Prime Minister Narendra Modi has called on Indians to adopt voluntary austerity measures, including working from home, limiting travel, and reducing gold purchases, he described fuel conservation as an act of “patriotism” and encouraged greater use of public transport, carpooling, and reduced fertiliser consumption, according to Al Jazeera.

Opposition leaders noted that this appeal came after the conclusion of a key round of state elections, though Fuel prices were kept stable during the campaign, which ended this month with the ruling BJP winning two of four states and expanding its influence.

India’s Reliance on International Oil

India is the world’s third-largest oil importer, with 90 percent of its oil coming from overseas, and about half of its crude supply transiting the Strait of Hormuz. The country has been heavily impacted by rising energy prices and supply disruptions linked to the US-Israel war on Iran. Despite this. New Delhi had delayed passing on higher crude prices to consumers, making it one of the last major economies to raise retail fuel prices, according to Al Jazeera.

The Federation of Indian Airlines,representing Air India, IndiGo, and SpiceJet,has warned of possible service suspensions unless the government intervenes to ease the cost burden; Air India is facing a heavier blow than its domestic rival IndiGo, which has not experienced the same level of route disruptions.