The government does not expect a sharp rise in inflation despite the recent surge in global crude oil prices triggered by the escalating conflict in the Middle East, Finance Minister Nirmala Sitharaman
said on Monday, noting that domestic inflation remains near the lower end of the Reserve Bank of India’s tolerance band.
In a written reply in Parliament, Sitharaman said the current inflation trajectory gives policymakers some cushion against external price shocks.
“Given that India’s inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point,” Sitharaman said.
Global oil prices surged about 26% in early trade, hitting their highest levels since July 2022, after Iran named Mojtaba Khamenei as the successor to Supreme Leader Ayatollah Ali Khamenei, who was killed in air strikes carried out by Israel and the United States more than a week ago.
The escalation has raised concerns over supply disruptions from the Middle East. Several major oil producers in the region have curtailed shipments as tankers cannot safely pass through the Strait of Hormuz, a critical route for global crude supplies.
The appointment of Mojtaba Khamenei came after US President Donald Trump earlier rejected him as a potential successor to Iran’s supreme leadership, while Israel signalled that it would target whoever leads Iran.
Sitharaman noted that global oil prices had been on a declining trend for nearly a year before the latest escalation in tensions on February 28.
According to the government’s data, the Indian basket of crude oil rose from $69.01 per barrel at the end of February to $80.16 per barrel by March 2 following the spike in geopolitical tensions.
Despite the increase, the government believes the impact on consumer prices will remain contained for now.
India’s retail inflation stood at 2.75% in January, close to the lower end of the RBI’s 2%–6% inflation target band.
Sitharaman also cited the RBI’s October 2025 Monetary Policy Report, which estimated that a 10% increase in crude oil prices could raise inflation by about 30 basis points, assuming a full pass-through to domestic fuel prices.
“However, the medium-term impact of the global crude oil price rise on inflation depends on several factors, including exchange rate movements, global demand and supply situation, monetary policy transmission, the state of general inflation, and the extent of the indirect pass-through,” Sitharaman added.
Crude oil prices on Monday surged above $115 per barrel as the Iran war intensified, threatening production and shipping in the Middle East.
However, US oil prices dropped by nearly $16 per barrel in less than two hours on March 9 and were trading below $103 per barrel after reports that G7 countries are considering releasing crude from strategic reserves.
According to the Financial Times, G7 finance ministers are scheduled to hold an emergency discussion at 8:30 am New York time with Fatih Birol, executive director of the International Energy Agency (IEA), to assess the impact of the Iran conflict on global energy markets.
(With inputs from Reuters)
