4 Fuel Price Hikes In 2 Weeks: Why Even An Instant US-Iran Deal Won't Bring Quick Relief Now

Last Updated:May 25, 2026, 09:02 IST

Even if Brent crude crashes tomorrow, oil marketing companies will still need time to clear expensive inventory already in the system.

The fuel meter in India has suddenly started moving again. After four hikes in just two weeks, petrol and diesel prices have gone up by nearly Rs 7.5 per litre, while CNG rates too have been hiked multiple times across cities. Petrol now costs more than Rs 100 per litre in most Indian cities. For millions of Indians already dealing with expensive groceries, higher EMIs and rising summer electricity bills, the question now is simple: if the US-Iran conflict ends tomorrow, will fuel prices finally stop rising too?

The answer to this question is that may not happen.

India’s latest round of fuel hikes is directly linked to the ongoing instability in West Asia. The conflict involving Iran has disrupted shipping through the Strait of Hormuz, one of the world’s most critical oil routes. India imports more than 85 per cent of its crude oil needs, and nearly half of that normally passes through the Hormuz route. Any disruption there instantly rattles global oil markets.

State-run oil marketing companies (OMCs), mainly Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, had frozen retail fuel prices for years despite rising global costs. But since May 15, prices have been revised four times as companies began passing on the pressure to consumers.

Monday’s latest revision alone increased petrol prices by Rs 2.61 per litre and diesel by Rs 2.71 per litre. The cumulative increase since May 15 has now crossed Rs 7 per litre.

Why Peace May Not Immediately Reduce Fuel Prices

Even if Washington and Tehran suddenly announce a ceasefire or a peace agreement, fuel prices in India or other countries are unlikely to fall overnight for several reasons.

Crude oil prices react faster than retail fuel prices

Global crude prices move instantly on geopolitical news. Retail prices do not. OMCs buy crude oil through contracts signed weeks in advance. Much of the fuel currently reaching Indian pumps was refined from crude purchased when oil prices were already elevated. So even if Brent crude crashes tomorrow, companies will still need time to clear expensive inventory already in the system. That lag can stretch from days to several weeks.

Oil Companies Are Still Recovering Losses

Industry reports suggest Indian fuel retailers absorbed substantial losses for months before prices were finally increased. Bloomberg reported that state refiners privately indicated they may need hikes of Rs 15-20 per litre to fully compensate for the current crisis. The recent hikes, therefore, are not just about present oil prices, but also about recovering earlier under-recoveries.

This is why analysts say even if crude prices soften slightly after a ceasefire, OMCs may choose to maintain current retail rates for some time instead of immediately cutting prices.

The Impact Of The Rupee

Oil is purchased in dollars. Even if crude prices cool, a weak rupee can keep India’s import bill elevated. Several recent reports have pointed out that alongside expensive crude, rupee weakness has also worsened the pressure on India’s fuel imports. So peace alone may not guarantee cheaper fuel unless the currency also stabilises.

What Industry Leaders Have Warned

Veteran banker Uday Kotak has been among the strongest voices warning that the full impact of higher fuel costs has not yet reached Indian consumers. Speaking at the CII Annual Business Summit earlier this month, Kotak said India should prepare for “rough weather" and warned that “the impact of higher fuel prices is yet to fully hit Indian consumers."

His warning is important because fuel inflation rarely stays limited to petrol pumps. Once transport costs rise, the impact spreads quickly across the economy – vegetables, milk, cab rides, airline tickets, delivery charges and even school bus fees eventually become more expensive.

Analysts across the energy sector are also warning that markets remain fragile even if diplomacy progresses. A recent analysis in The Guardian noted that oil markets have already entered a “danger zone", with global inventories tightening and supply chains under pressure. The report said a US-Iran agreement may calm markets temporarily, but the energy system could remain “fragile" for months.

At the same time, White House economic adviser Kevin Hassett recently said that a successful deal reopening the Strait of Hormuz could lead to “a gusher of oil" and eventually lower energy prices globally. That word, eventually, is key.

Why CNG Prices Are Rising Too

Many consumers shifted to CNG vehicles over the past few years to escape petrol and diesel volatility. But this time, CNG has not been spared either.

Gas prices globally have also risen amid supply disruptions in West Asia. India imports a large amount of liquefied natural gas (LNG), and higher international gas prices are now feeding into domestic CNG revisions. That means auto drivers, cab aggregators and commercial transport operators are all facing higher operating costs simultaneously.

Could Fuel Prices Still Rise Further?

If tensions in West Asia continue or the Strait of Hormuz remains partially disrupted, analysts expect further pressure on oil markets. Reuters reported that Indian retailers are still trying to rein in losses despite multiple hikes already. Some experts believe the current increases may only be the beginning if crude sustains above current levels for several more weeks.

Inflation: The Bigger Worry

The larger concern for India is not just expensive petrol. It is what follows.

Fuel prices influence nearly every layer of the economy. Transport becomes costlier. Freight rates rise. Food inflation increases. Manufacturing costs climb. Eventually, households cut discretionary spending. In other words, even if the war ends soon, the economic aftershocks may linger much longer.

For now, consumers hoping for an immediate rollback at fuel stations may have to wait. Peace in West Asia could cool global oil markets quickly, but the journey from crude oil tankers to Indian petrol pumps is far slower, and far more complicated. However, when that peace will come is also a big question.

Hopes of an immediate breakthrough in ending the US-Iran conflict remain uncertain despite repeated claims by US President Donald Trump that peace could be near. Reports say there is currently no concrete ceasefire agreement in sight, with fighting and tensions continuing across the region. In a social media post, Trump said “constructive" talks were proceeding but “both sides must take their time and get it right".

This means any deal between the US and Iran could still take time, eventually resulting in more pressure on fuel prices.

News explainers 4 Fuel Price Hikes In 2 Weeks: Why Even An Instant US-Iran Deal Won't Bring Quick Relief Now

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