LPG, Petrol Shock Fears: CPI In February Likely to Remain Benign; Iran-US War May Pose Inflation Risk

LPG, Petrol Shock Fears: The intensifying Middle East crisis amid the ongoing Iran-Israel-US war could push consumer inflation higher next month, driven by volatile crude oil prices. Supply disruptions in the Strait of Hormuz, which are triggering an LPG shortage, and a potential fuel crunch in India are likely to further increase fuel costs. While experts warn that volatile Brent crude may soon feed into logistics and consumer prices, India's Consumer Price Index (CPI) inflation for February is expected to remain benign and within the comfort range.

A 10% increase in oil price raises CPI by 20 bps contemporaneously (RBI), as per Crisil report released on Wednesday, March 11. "The escalation in the uncertainties since late February, leading to disruptions in the Strait of Hormuz, presents a critical upside risk to global prices. Prolonged stress can impact India's macroeconomic indicators directly and indirectly," read the report.

February CPI Inflation Data: What To Expect?

India's CPI inflation data for February 2026 is set to be released on Thursday, March 12. The monthly CPI inflation data in India, also known as retail inflation, is a measure to check how much the prices of everyday goods and services (like food, fuel, housing, and transport) have increased or decreased compared to the previous year.

India's year-on-year retail inflation rate, based on CPI with revised base year 2024, stood at 2.75% in January, against inflation in January 2025. Experts believe that India's CPI inflation in February is likely to remain benign.

Retail Inflation In Feb Likely To Remain Benign

"India's February CPI inflation print is expected to reinforce the ongoing disinflation trend, with most economists anticipating retail inflation to remain comfortably below the RBI's medium-term tolerance band," explained Naren Agarwal, CEO, Wealth1, adding that food inflation may moderate as vegetable prices corrected sharply following the winter harvest.

"Tomato, onion and potato prices softened sequentially, while cereal inflation has also stabilised compared with the spikes seen in 2023-24. As a result, market estimates broadly place February CPI inflation in the 2.7-3% range, reflecting continued easing in headline price pressures," added Agarwal.

Iran-US War Spillover Effect on India Poses Inflation Risk

The growing Middle East crisis due to Iran-Israel-US war has triggered a global fuel crisis by disrupting the Strait of Hormuz, which is a crucial pathway for 20% of the world's oil supply. Nearly 55% of India's crude oil is imported from Gulf countries and passes through the Strait of Hormuz, according to a Crisil report. India's rising oil dependence (from 77.6% in FY14 to 88% in FY25) has further increased the risk of higher inflation in the coming weeks.

The central government invoked the Essential Commodities Act, 1955 to regulate production and ensure adequate supply and distribution of natural gas for priority sectors. The development came after media reports of several hotels, restaurants, and eateries across India facing closure due to LPG shortages. Additionally, industry bodies have urged state governments to ensure adequate supply of commercial gas cylinders.

Continued Middle East Crisis Could Push Retail Inflation

Experts warn that a persistent crude oil supply crisis could push headline CPI inflation by about 20 basis points in the short run.

"India's inflation is highly sensitive to oil shocks. Empirical analysis shows that a 10% rise in crude can lift headline CPI inflation by about 20 basis points in the short run. With close to 90% import dependence, swings in Brent quickly pass through to fuel costs, logistics, and consumer prices," explained Rajeev Sharan, Head of Research, Brickwork Ratings.

Currency pressures due to rising oil imports may widen current account deficit and may further amplify imported inflation, warned Naren Agarwal adding that a "$10 increase in crude oil prices can push India's inflation higher by around 30-40 basis points over time."

"If geopolitical tensions persist through March and oil prices remain elevated, the disinflation trend seen in early 2026 could begin to face headwinds, particularly through fuel and transport-linked price pressures," added Agarwal.