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US-Iran Tensions Threaten India's Inflation Control, Warns Bank of Baroda

A Bank of Baroda report warns that escalating US-Iran tensions pose a significant upside risk to India's inflation by potentially driving global commodity prices higher. India's wholesale inflation (WPI) did ease to 0.8% in December 2025, though it remained higher than the previous month's level. Underlying price pressures are evident as core inflation increased, while a depreciating rupee could further elevate import costs. Although global oil prices have recently softened, geopolitical developments and currency movements remain critical to India's inflation outlook.

Key Points: US-Iran Tensions May Fuel India's Inflation: Bank of Baroda

  • Geopolitics key inflation risk
  • WPI eased to 0.8% in Dec 2025
  • Core inflation rose to 2%
  • Rupee depreciation adds pressure
  • Global oil prices offer near-term relief
2 min read

Escalation in US-Iran tensions adds to India's inflation risk as commodity prices may rise: Bank of Baroda

Bank of Baroda warns escalating US-Iran tensions could push commodity prices higher, adding upside risks to India's inflation despite recent WPI easing.

"Any escalation in tensions between US and Iran may also push commodity prices upwards and add to upside risks to inflation - Bank of Baroda report"

New Delhi, January 15

Escalation of tensions between the United States and Iran could add to upside risks to inflation in India, as it may push global commodity prices upwards, highlighted a report by Bank of Baroda.

The report highlighted that geopolitical risks remain a key concern. Any escalation in tensions could push commodity prices higher, especially energy and industrial commodities, which would add to upside risks to inflation in India.

It stated "Any escalation in tensions between US and Iran may also push commodity prices upwards and add to upside risks to inflation".

The wholesale price index (WPI) inflation eased to 0.8 per cent in December 2025, compared to a 2.6 per cent increase in December 2024.

However, inflation was higher than the (-) 0.3 per cent decline recorded in November 2025. On a year-on-year basis, the moderation in WPI inflation was supported mainly by softer food and manufactured product inflation, while fuel inflation was slightly higher compared to last year.

The core inflation also inched up to 2 per cent in December 2025 from 0.7 per cent in December 2024, indicating some underlying price pressures in the economy.

The report mentioned that in the manufactured products category, softness in inflation was driven by items such as food products, textiles, wearing apparel, computers and electronics, and chemical and leather products. These categories helped ease overall price pressures during the month.

The report also added that the slower pace of deflation in fuel inflation was mainly driven by the mineral oil index. However, on the global front, prices of oil have declined so far in January 2026, offering some near-term relief on fuel-related inflation.

Other commodity prices, including lead, zinc and aluminium, have also been witnessing downside pressures.

Despite this, the report cautioned that a depreciating rupee could increase the cost of imported goods, thereby adding to inflationary pressures.

So the report outlined that while recent trends show easing in WPI inflation, the global developments, currency movements and geopolitical tensions will remain critical factors influencing India's inflation outlook going forward.

- ANI

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Reader Comments

R
Rohit P
It's frustrating that conflicts on the other side of the world directly hit our pockets. Just when WPI inflation was showing some signs of easing... The RBI and Finance Ministry really have their work cut out to manage this.
A
Aman W
The report is right to highlight the rupee's role. A weaker rupee makes all imports, including oil, more expensive. We need to focus on boosting our own manufacturing and energy production to reduce this vulnerability. Atmanirbhar Bharat is the only long-term solution.
S
Sarah B
While the geopolitical risk is real, the article also mentions global oil prices have declined in January 2026. Let's not panic just yet. The government has managed inflation relatively well so far. Hoping for diplomatic solutions to ease tensions.
K
Karthik V
Core inflation inching up is the real concern. It shows underlying pressure beyond just food and fuel. If global commodity prices rise due to this conflict, it will hit our industries hard. Small businesses will suffer the most. 😟
N
Nikhil C
A respectful criticism: Reports like these often state the obvious. "Geopolitical tensions can raise prices." Yes, we know. What we need more of is clear communication on what concrete steps are being taken to build buffers and protect the economy. Action over analysis, please.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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