Crude’s medium-term impact hinges on exchange rates, global demand-supply and policy transmission, says FM Sitharaman

Finance Minister Nirmala Sitharaman said on Monday, March 9, India’s inflation remains near the lower bound and the short-term impact is limited. She added that the medium-term impact of crude prices on inflation will depend on several factors, including exchange rate movements, global demand-supply conditions and monetary policy transmission.

In a written reply in the Lok Sabha, she said that the prices of both global crude oil and the Indian basket had been on a declining trend over the past year until geopolitical clashes began in West Asia on February 28, 2026.

"Between the end of February and untill March 2, 2026, the Crude Oil FOB Price (Indian Basket) rose from USD 69.01/barrel to USD 80.16/barrel. Given that India's inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point," the Finance Minister said.

She made the remarks while responding to a question on whether the government has reviewed the impact of rising global crude oil prices on inflation in the country.

Global crude oil prices have surged sharply since February 28, when the United States and Israel launched joint military strikes on Iran, prompting Tehran to retaliate with attacks on US bases in the region as well as on Israel.

The sharp decline in the markets has been largely triggered by a massive surge in crude oil prices following the intensification of the United States-Israel conflict with Iran. Brent crude has jumped more than 25 per cent to around $116 per barrel, while the US benchmark West Texas Intermediate has also surged above $114 per barrel. Oil prices have spiked amid concerns that the conflict could disrupt energy production and key shipping routes across the Middle East. Tanker traffic through the Strait of Hormuz -- a vital corridor that carries nearly 20 per cent of the world’s oil supply -- has largely halted, raising fears of prolonged supply disruptions.

India is especially vulnerable to rising oil prices as it imports over 85 per cent of its crude oil needs. Higher crude prices could drive up the cost of petrol, diesel, cooking gas and aviation fuel, increasing expenses for businesses and consumers.