India Raises Fuel Prices Amid Iran Conflict, Inflation Fears Grow

India raised petrol and diesel prices for the first time in four years due to rising global oil prices caused by the Iran conflict. Prime Minister Narendra Modi urged citizens to conserve fuel and reduce spending as experts warned of possible inflation and more fuel price hikes.

India’s state-run fuel retailers on Friday increased the prices of petrol and diesel for the first time since the outbreak of the Iran war, as rising global crude oil prices continue to put pressure on the country’s energy sector and economy.
The fuel price hike was announced by Indian Oil Corporation, Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL). Prices were raised by Rs 3 per litre, representing an increase of more than 3%.
Following the adjustment, diesel now sells at Rs 90.67 per litre, while petrol costs Rs 97.77 per litre in many parts of the country. However, fuel prices vary across India depending on transportation charges, dealer commissions, and taxes imposed by individual states.
The increase comes amid soaring global oil prices triggered by the ongoing conflict involving Iran, Israel, and the United States. International crude prices had earlier surged beyond $120 per barrel before easing slightly to around $100 to $105 per barrel.
Back in April, Indian oil ministry official Sujata Sharma disclosed that the high cost of crude oil was causing major losses for Indian fuel retailers. According to her, companies were losing approximately Rs 100 per litre on diesel and Rs 20 per litre on petrol due to the widening gap between import costs and domestic selling prices.
While BPCL officially confirmed the fuel price increase, HPCL and Indian Oil Corporation did not immediately respond to media requests for comments.
The development coincides with Indian Prime Minister Narendra Modi’s ongoing state visit to the United Arab Emirates, where both countries signed agreements on strategic defence cooperation, petroleum reserves, and the supply of liquefied petroleum gas.
This marks the first increase in petrol prices by India’s state fuel retailers in four years. The Modi administration had earlier reassured citizens that fuel prices would remain stable despite the Middle East crisis. However, economic analysts warned that such assurances would be difficult to sustain if tensions in the region continued.
The latest fuel hike comes only days after Modi appealed to Indians to make sacrifices in order to protect the country’s economy from the effects of the Iran conflict and rising global energy prices.
Addressing a public rally earlier this week, the prime minister urged citizens to reduce fuel consumption, work from home whenever possible, postpone foreign trips, avoid unnecessary imports, and delay the purchase of gold. He described these measures as patriotic duties during a period of international uncertainty and economic instability.
“The West Asia crisis is one of the worst in the decade; just as we overcame the COVID-19 pandemic, we will also come out of this,” Modi stated during the rally.
Following his appeal, Modi reportedly reduced his official convoy to just two vehicles as a symbolic gesture. In addition, authorities in the national capital introduced temporary conservation measures expected to last for 90 days. These measures include two work-from-home days each week for government employees, a designated “No Vehicle Day,” and instructions directing ministers to use public transportation.
Several Indian states also instructed government departments to cut down official travel, avoid physical events, and conduct meetings virtually in order to conserve fuel and reduce spending.
India is currently grappling with a shortage of US dollars, which are required to pay for imports. Oil and gold remain the country’s largest imports, making the economy highly vulnerable to fluctuations in global commodity prices and exchange rates.
Economists have warned that higher fuel prices could contribute to rising inflation across the country. Madhavi Arora, chief economist at Emkay Global Financial Services, stated that the direct effect of the latest hike on consumer inflation may be limited to about 15 basis points, but the broader indirect impact on transportation, production, and household expenses could be far more significant.
According to Arora, the current increase may not be sufficient to offset losses faced by oil retailers and could signal the beginning of multiple gradual fuel price hikes in the coming months.
Recent government data showed that India’s retail inflation rose to 3.48% in April, largely driven by increasing food prices. Analysts believe the inflation outlook remains uncertain due to the risks associated with higher energy costs linked to the Middle East conflict.
Prashant Vashisth, vice president and co-head of corporate ratings at ICRA, Moody’s Indian affiliate, said that India’s petrol demand growth is likely to slow down as fuel prices rise and conservation measures such as remote work become more common.
Meanwhile, opposition leaders strongly criticized the Modi government over both the timing and implementation of the fuel price increase. Critics accused the administration of delaying the hike until after the 2026 State Assembly elections to avoid political backlash.
Mallikarjun Kharge, president of India’s main opposition party, the Indian National Congress, accused the government of pretending that the country faced no economic difficulties during the election period.
“During elections, the Modi government behaves as if everything is normal, and the central government’s only responsibility is winning state elections. Now that the crisis is deepening, Modi ji has suddenly started promoting work from home and fuel conservation,” Kharge said.