On March 17, 2026, crude oil prices have again crossed $ 100 per barrel. The reason for this is the ongoing conflict between America and Israel with Iran and the threat of blockage in the Strait of Hormuz, which is an important route for oil supply around the world. This increase in prices has increased concerns about inflation and market fluctuations. Earlier, in a volatile session on March 9, 2026, the price of crude oil briefly reached $ 119 per barrel, but a day later it stabilized at $ 83 per barrel.
For India, the average price of crude oil (crude basket price) has increased to about $ 101 per barrel so far in the second half of FY 2026. Experts say that the increase in oil prices may increase inflation further and the pace of economic growth may slow down a bit.
Naval Kagalwala, COO and Head of Products, Shriram Wealth Limited, said in the Money Control report that the price of international crude oil (mixture of sweet and sour grades) for India has now increased to $ 101.25 per barrel in the month of March. Due to this, the average for the second half of FY 2026 (H2FY26TD) has become about $ 70.6 per barrel, which is slightly higher than the RBI estimate of $ 70 per barrel. Kagalwala said that a 10 percent increase from $ 70 per barrel could increase inflation by about 30 basis points (bps) and slow economic growth by 15 basis points.
impact on inflation
Currently, inflation in India is within the comfort zone set by the Reserve Bank of India (RBI), so prices are not increasing very fast. However, if this conflict continues and oil prices remain high, inflation may increase, because India imports most of its crude oil from other countries. When oil becomes expensive, transport, fuel and many other things also become expensive. If we look at the latest figures, retail inflation in the country came down to 3.21 percent in February. Whereas wholesale inflation has reached a high of 11 months at 2.13 percent.
CrForex MD and CEO Amit Pabari said in a media report that when crude oil prices increase rapidly, transportation becomes expensive, manufacturing costs increase, and logistics costs also increase. Over time, these increased costs are passed on to consumers through higher fuel prices, rising food prices, and increased prices of everyday goods and services. As a result, inflationary pressure starts increasing in the entire world economy.
weakening rupee
Also, the Indian Rupee is weakening and moving towards the level of 92.3 against the US Dollar. Due to weak rupee, imports like crude oil become more expensive, which can further increase inflation. Pabari said that pressure on the rupee is likely to remain. Gradually, the USD/INR pair may move towards 93 levels. If there is any good news regarding reduction in war or softening of crude oil prices, then the rupee may see strength for some time till the level of 91.591.7. But it is also not clear how long this conflict will last and what effect it will have on oil, INR/USD levels and other commodity prices. Experts say that investors should be careful. Higher oil prices may increase inflation in India.
What should investors do?
Experts are advising investors not to panic, but maintain correct asset allocation, as they believe that the rupee will not weaken too much, as RBI can intervene to control fluctuations in the currency market. Kagalwala said in the report that the mantra of asset allocation, especially in such circumstances, is equally important even today. Investors should keep their portfolio as per their decided asset allocation and financial targets. Due to continued selling in local equities (Indian stock markets), valuations in the broader markets have eased somewhat and are moving closer to their long-term averages.
Kagalwala also said that valuations of mid- and small-caps are still running slightly above the 10-year average. A variety of large-cap based strategies—including large-cap, flexi-cap and multi-cap—and a few select hybrid funds appear to be in a better position. Kagalwala said that investors who have an investment horizon of more than 5 years and have a higher than average risk appetite can consider investing gradually in small and mid-caps. Investors should be careful and observant, keep an eye on changing conditions, and consider investing gradually and in installments.
Increase in bond yield
In the fixed income market, bond yields have risen as liquidity dries up at the end of the financial year and there are concerns about rising inflation. This means that when yields rise, bond prices fall, as newer bonds start paying higher interest, making older bonds less attractive. For example, suppose you buy a government bond worth Rs 1,000, which gives 7 per cent interest, then you will get Rs 70 per year. Later, if inflation increases and new bonds start paying 8 percent interest, investors will prefer those new bonds because they pay Rs 80 per year. To attract buyers, the price of your old bond must fall. If its price falls to around Rs 875, an annual payment of Rs 70 now gives a yield of close to 8 percent to the new buyer. Thus, when market yields rise, existing bond prices fall so that their returns match the new, higher rates.
Where can you invest
Pabari said in the Money Control report that concerns about rising inflation often affect the bond market as well. Investors generally demand higher yields to compensate for the risk of rising prices, which pushes government bond yields higher. For investors, higher crude oil prices can alter portfolio performance. Due to this uncertainty, Kagalwala said investors can consider short-term corporate bonds or debt mutual funds, which have maturities of up to three years. These options can offer comparatively higher returns now, while having less price volatility than long-term bonds. Pabari further said that at the same time, investors generally turn to inflation-protected assets, such as commodities and gold, which perform better in times of rising inflation and help maintain purchasing power.