India's central bank warned Friday that elevated energy prices and disruptions to global oil shipments posed growing risks to the world economy and India's near-term outlook, as conflict in West Asia continued to pressure commodity markets and supply chains.
In its May 2026 Bulletin, the Reserve Bank of India said global economic conditions remained fragile amid geopolitical tensions, volatile financial markets and uncertainty over growth and inflation.
RBI said tanker traffic disruptions through the Strait of Hormuz had constrained global commodity markets in April, particularly energy shipments, leading to higher freight costs and renewed pressure on oil and fuel prices.
Brent crude prices fluctuated sharply in April and May, initially easing during a temporary ceasefire in West Asia before firming again as the conflict escalated. The central bank said oil prices retained an "overall upward bias" amid evolving geopolitical developments.
The World Bank Commodity Price Index rose sharply during the period, driven by higher energy, fertilizer and base metals prices, while the Bloomberg Commodity Index also climbed on gains in energy and agricultural commodities.
"Financial conditions, crude oil prices and capital flows continue to pose challenges to the external sector outlook," RBI said.
The bulletin noted that prices of commodities dependent on the Strait of Hormuz transit route remained elevated through April and early May. Base metal prices, including aluminum, zinc and nickel, also rose because of supply disruptions and higher fuel costs.
Rising fuel prices contributed to higher inflation across major economies. Inflation in the US climbed to its highest level in three years, while euro zone inflation reached its highest level since September 2023, driven largely by higher energy costs and elevated services prices, RBI said.
Among emerging economies, inflation accelerated in China, South Africa and Brazil, also largely due to rising energy prices.
Despite the global turbulence, RBI said India had entered the current phase "from a position of macroeconomic strength," supported by resilient domestic demand.
The central bank added that strong services exports, positive foreign direct investment inflows, sizeable foreign exchange reserves and proactive policy measures by the government and RBI should help cushion the economy against external energy and trade shocks.