Global oil markets have entered one of their most volatile phases in recent years, with crude prices surging sharply amid escalating geopolitical tensions in the Middle East. The spike has triggered concerns about whether petrol, diesel, and LPG (cooking gas) prices in India could soon increase.
Crude oil prices have surged dramatically in recent sessions as supply risks intensified following disruptions around the Strait of Hormuz, a key route for global energy shipments. The surge has also pushed energy futures higher on the Multi Commodity Exchange of India (MCX), where crude oil futures jumped more than 21% to Rs 10,119 per barrel, marking an all-time high in rupee terms.
The sharp rally has triggered discussions across markets about inflation, fuel pricing policy, and the financial impact on India’s oil companies.
Why crude oil prices are rising sharply
The latest spike in crude prices is being driven by geopolitical disruptions in West Asia. The ongoing conflict involving Iran, Israel and the United States has significantly disrupted shipping and supply routes across the region.
The Strait of Hormuz, which carries roughly 20% of global oil trade, has seen tanker disruptions, shipping insurance issues and supply concerns. These developments have pushed global oil benchmarks such as Brent crude above $115–117 per barrel, among the sharpest price rallies seen in recent years.
India, which imports around 85% of its crude oil requirements, is particularly sensitive to such spikes. When global oil prices rise, the cost of importing crude increases, affecting refining companies and eventually retail fuel prices.
LPG prices have already increased
Among all fuel categories, LPG prices have already been revised upward.
Domestic LPG cylinder prices (14.2 kg) were increased by Rs 60 from March 7, 2026, marking the first major revision in nearly a year.
The revised prices include:
| City | New LPG Price |
|---|---|
| Delhi | Rs 913 |
| Mumbai | Rs 912.50 |
| Kolkata | Rs 939 |
| Chennai | Rs 928.50 |
Commercial LPG cylinders (19 kg), widely used by hotels and restaurants, saw a larger increase of Rs 115, taking the Delhi price to around Rs 1,883.
India imports more than 60% of its LPG requirements, and prices are linked to global benchmarks such as the Saudi Contract Price. Rising crude and LPG import costs have pushed up domestic prices.
Even after the hike, the government has partially absorbed the cost increase. The actual producer cost of LPG is estimated to be around Rs 987 per cylinder, meaning only part of the increase has been passed on to consumers.
Under the Pradhan Mantri Ujjwala Yojana, eligible households still receive a subsidy of around Rs 300 per cylinder, reducing the effective price to roughly Rs 613 for beneficiaries.
Petrol and diesel prices remain unchanged for now
Despite the crude price surge, petrol and diesel prices have not been increased yet.
Retail fuel prices have remained unchanged since April 2022. Current benchmark rates include:
| City | Petrol | Diesel |
|---|---|---|
| Delhi | Rs 94.77 | Rs 87.67 |
| Mumbai | Rs 103.54 | Rs 90.03 |
The stability is largely because oil marketing companies are absorbing some of the cost increases rather than passing them directly to consumers.
India’s major fuel retailers include:
- Indian Oil Corporation
- Bharat Petroleum
- Hindustan Petroleum
These companies operate under a system where retail prices can remain stable even when global crude fluctuates, particularly during periods of high inflation or political sensitivity.
Government officials have indicated that no immediate price hike is planned, partly because India currently maintains adequate fuel stocks and diversified crude imports.
Why oil companies are under pressure
Even though petrol and diesel prices remain unchanged, the surge in crude prices is placing pressure on oil marketing companies.
According to a recent research note from UBS, higher crude prices reduce marketing margins for Indian oil companies because retail fuel prices are not adjusted immediately.
The brokerage downgraded several oil marketing companies due to rising uncertainty in crude markets.
The revised ratings include:
| Company | Rating | Target Price |
|---|---|---|
| Indian Oil Corporation | Neutral | Rs 175 |
| Bharat Petroleum | Neutral | Rs 365 |
| Hindustan Petroleum | Sell | Rs 340 |
UBS estimates that if crude prices rise by $5 per barrel without retail fuel price hikes, oil marketing companies could lose around half of their profits.
The brokerage has also cut profit forecasts for FY27:
- IOC profit estimates reduced by 19%
- BPCL estimates cut by 15%
- HPCL estimates cut by 46%
This explains why oil company stocks have fallen sharply during recent sessions.
Impact on inflation and the broader economy
Higher crude prices typically have a cascading effect across the economy.
Energy costs influence transportation, logistics, fertilizer production and manufacturing. When oil prices remain elevated for a prolonged period, it can lead to higher food prices and overall inflation.
Economists estimate that a 10% increase in crude prices could add roughly 10–30 basis points to India’s inflation, depending on how much of the increase is passed on to consumers.
Higher crude prices can also widen India’s current account deficit and weaken the rupee, increasing the overall cost of imports.
Historical oil price shocks and lessons
Oil markets have experienced several major shocks in the past that triggered global economic impacts.
Some of the most notable include:
- 1973 oil embargo: Prices surged from about $3 to $12 per barrel after Arab OPEC countries restricted supply.
- 1979 Iranian revolution: Oil prices doubled to nearly $40 per barrel.
- 1990 Gulf War: Prices briefly spiked above $40 due to supply fears.
- 2008 commodity boom: Crude surged to a record $147 per barrel before collapsing during the financial crisis.
- 2022 Russia-Ukraine war: Brent crude surged above $130 per barrel.
The current surge has similarities with earlier supply disruption shocks, particularly the Gulf War and the 1973 oil crisis.
Will petrol and diesel prices rise next?
The key factor determining future price changes will be how long crude oil remains elevated.
If crude stabilizes or falls, oil companies may continue absorbing the cost. However, if prices remain above $100 per barrel for an extended period, gradual retail fuel price increases may become unavoidable.
Some analysts estimate that a sustained crude surge could eventually require petrol and diesel price increases of around Rs 0.50 per litre or more, though such decisions depend on government policy and inflation considerations.
For now, the government appears to be prioritizing consumer price stability, while oil companies absorb some of the volatility.
The bottom line
At present:
- LPG prices have already risen by Rs 60 per cylinder
- Petrol and diesel prices remain unchanged
- Oil marketing companies are absorbing higher crude costs
- Future hikes depend on how long crude remains above $100
With geopolitical tensions continuing and crude markets extremely volatile, India’s fuel pricing policy will remain closely watched in the coming weeks.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions. Author or Business Upturn is not liable for any losses arising from the use of this information.