Global crude oil prices have risen sharply due to the ongoing conflict in the Middle East, but India does not expect the surge to significantly push up inflation, Finance Minister Nirmala Sitharaman said on Monday.
Replying in writing in Parliament, Sitharaman said domestic price levels are currently near the lower end of the Reserve Bank of India’s (RBI) tolerance band, which should help limit the impact of higher crude prices on inflation.
OIL PRICES RISE AMID MIDDLE EAST CONFLICT
Oil prices surged about 26% in early trade to their highest level since July 2022. The jump came after Iran named Mojtaba Khamenei as the successor to his father, Supreme Leader Ayatollah Ali Khamenei.
Ayatollah Ali Khamenei was killed in air strikes carried out by Israel and the United States more than a week ago.
Major oil producers in the Middle East have also cut supply as they are unable to safely send shipments through the Strait of Hormuz, a key route used to transport oil to refiners around the world.
Mojtaba Khamenei’s appointment comes after U.S. President Donald Trump earlier rejected him as a candidate to become Iran’s new supreme leader. Israel has also said it would target whoever leads Iran.
Sitharaman said global oil prices, including the Indian crude basket, had been declining for about a year before the conflict in the region intensified on February 28.
According to the written reply, the Indian crude basket rose from $69.01 a barrel at the end of February to $80.16 a barrel by March 2.
Despite the increase, the government believes the effect on consumer prices in India will be limited for now.
INFLATION CURRENTLY NEAR LOWER BAND
Sitharaman said the country’s current inflation level provides some room to absorb the impact of rising oil prices.
“Given that India’s inflation is near the lower bound, the impact on inflation is not estimated to be substantial at this point,” she said.
Retail inflation in January stood at 2.75%, which is close to the lower end of the Reserve Bank of India’s target range of 2% to 6%.
Sitharaman also referred to the Reserve Bank of India’s October 2025 Monetary Policy Report.
According to the report, a 10% increase in crude oil prices could push inflation higher by around 30 basis points if the entire increase is passed on to domestic fuel prices.
However, she said the actual impact over the medium term would depend on several factors.
“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.
