New Delhi: Wholesale inflation hit an 11-month high in February, well before the recent surge in crude oil prices due to the conflict in West Asia. Government data released on Monday (May 11) reports a steeper rise in prices in February, following three previous months of higher rates of price increases.

Food items, textiles, basic metals and non-food items were primary causes behind the inflation. Economists said rising crude oil prices could now push wholesale inflation higher in the government's March data and in later months, reports the Times of India.

India Ratings and Research (Ind-Ra) said in a March 31 note on the macro view for the economy that it believes continued dependency on energy import is a key weakness for the economy. The crisis in West Asia "has increased the vulnerability of Indian economy to energy prices", it said.

"A USD10/bbl increase in crude oil prices could widen the current account deficit by USD16.7 billion, increase currency weakness, and push inflation. Average inflation in base case scenario is now expected to be 4.1% compared to the earlier forecast of 3.7%, and the currency may weaken 4.5%-5.0% yoy in FY27," Devendra Kumar Pant, chief economist, Ind-Ra, said in the note, which added that the overall impact could be higher, based on the second-round effects of supply shortages, increased freight costs and a slowdown in economic activities.

Barclays had warned in February 2026 – the day the West Asia conflict began – that crude could cross USD 100 a barrel. Brent crude is currently trading at over USD 105, as the United States and Iran fail to arrive at an agreement to end the conflict, which has partially centrered around the Strait of Hormuz, said reports on Friday (May 15).

Around 30% of India's crude oil imports pass through the Strait of Hormuz.

On the domestic front, India has reversed an earlier policy of keeping pump prices of fuel stable. Petrol and diesel prices were hiked across the country on Friday by around Rs 3 per litre. After the significant hike, the deflation in fuel and power category, which had narrowed to 3.78% in February from 4.01% in January, may now reverse, instead adding inflationary pressures unless measures are taken.

And it is not likely to be the end of the crude surge, going by economist predictions.

Global crude oil prices averaged USD 68 per barrel in February, compared with USD 63 per barrel in January. The retail prices of fuel were reduced by the Indian government once, in the run-up to the 2024 Lok Sabha election, effectively by roughly Rs 2 a litre.

The government led by Narendra Modi and the prime minister himselve have in recent days urged consumers to voluntarily work from home, to not buy gold or travel overseas and take other steps to conserve foreign exchange. Economists expect these measures, if implemented, to have the second-round effects warned of earlier – a slowing down of production and further downward spiral in demand.

Many have pointed out that an effective response to the West Asia wars would have been to build strategic reserves and refining capacity, in which India has lagged.

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