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- In the opposite direction: will inflation in Russia decrease due to the war in the Middle East
In the opposite direction: will inflation in Russia decrease due to the war in the Middle East
Inflation in Russia has slowed down after a strong start at the beginning of the year. In recent weeks, the indicator has been consistently near the 0.1% mark for 6-8 days. The slowdown is expected, because the effect of the tax increase should not have lasted more than two months. Nevertheless, the accumulated price increase since the beginning of the year was 2.59%, which is very significant. The most important question now is how much the geopolitical events in the world will affect Russian inflation: will it slow down from the bombing of Iran and the blockade of the Strait of Hormuz or, conversely, accelerate. Experts are divided on this issue. For more information, see the Izvestia article.
Accumulated effect
In the first months of 2026, prices in Russia presented an unpleasant surprise: against the background of rising VAT, they increased even more than expected. However, the March figures show that inflation has more or less returned to control. The annual value fell to 5.8%, and the growth of 0.1% per week is a relatively neutral indicator on an annual basis, approximately corresponding to or slightly exceeding the target mark of the Central Bank — 4%. All this allowed the Bank of Russia to lower the rate by half a percentage point to 15% at a meeting on March 20.
But if there is a relative lull in the country's economy, this cannot be said about the external situation. The war in the Middle East, which was expected to be a lightning operation by analogy with the summer of 2025, has not only dragged on, but also shows all the signs of escalation with the closure of the Strait of Hormuz (a thing unthinkable during all previous Middle Eastern exacerbations, has become a routine fact) and massive strikes on the oil and gas infrastructure of all parties to the conflict in the region. Burning Qatari, Kuwaiti, and Saudi oil refineries, fields, and terminals have become the dominant news topic. Even if the conflict ends tomorrow (which looks almost unbelievable), the effect of it will last for many more months, if not years.
First of all, a surge in global inflation is expected. Oil prices have already jumped above $110 per barrel (for the Brent brand). The situation with gas is similar, especially since storage facilities in Europe are almost empty due to the cold winter. But the East Asian states (China to a lesser extent), which were directly dependent on supplies from the Persian Gulf, suffered even more damage. Events with fertilizers, aluminum, and even microchips are developing in a similar scenario. From day to day, the effect will manifest itself in the economies of different countries.
Russia stands alone. The export sector is obviously benefiting from the "slaughter" in the markets, as Russia is becoming the most important supplier, against which a number of sanctions have already been suspended. Russia is well supplied with almost all raw materials supplied from the Gulf countries or their derivatives. Therefore, it is not entirely clear whether the effect of shortages in the largest markets will be inflationary for us or, conversely, slow down price growth due to a strong national currency. Izvestia interviewed several domestic experts.
"Higher oil prices mean lower inflation"
Evgeny Goryunov, Head of the Monetary Policy Laboratory at the Gaidar Institute
— Rather, the conflict in Iran may contribute to lower inflation through the strengthening of the ruble exchange rate. Russia is already selling oil at a higher price and receiving large foreign exchange earnings. Previously, analysts expected lower oil prices (this scenario was considered in early 2026), which could lead to higher import prices and higher inflation, but now there is no such certainty. The logic here is straightforward: Higher oil prices mean a stronger ruble— cheaper imports, and lower inflation.
At the same time, it is important to take into account that inflation largely depends on fiscal policy. So far, the Ministry of Finance has announced its intention to significantly reduce costs against the background of deficits in recent years. However, if, against the background of rising oil and gas revenues, it is decided to soften this line and increase costs, inflationary pressures may increase. So far, such a scenario looks less likely — the Ministry of Finance traditionally adheres to a fairly conservative policy — but it cannot be completely ruled out.
"Import inflation is rising"
Olga Belenkaya, Head of the Macroeconomic Analysis Department at FG Finam
— Russia has become one of the main beneficiaries of the military conflict in the Middle East. At the beginning of the year, under the influence of Western sanctions and US pressure on India to stop buying Russian oil, Urals oil was trading in the range of $40-45 per barrel. Since the outbreak of hostilities in the Middle East, world oil and gas prices have risen sharply, while oil supplies from the Persian Gulf countries have fallen, which contributes to an increase in demand for Russian oil and a reduction in the price discount that has expanded due to sanctions (a number of media reports even say that the discount price of Urals to Brent has been replaced by a premium).
The United States temporarily eased some of the sanctions, first allowing India to buy Russian oil on tankers at sea for 30 days, and then lifting for a month the sanctions on Russian hydrocarbons loaded on tankers before March 12. The demand of India and China for oil from the Russian Federation has increased significantly. According to Bloomberg, based on data from the Argus price agency, the price of Urals crude oil on the west coast of India reached $98.93 per barrel, the highest level since the beginning of 2022.
This is positive for the Russian budget and for the income of exporters. According to Financial Times estimates, Russia's oil export revenues against the background of the escalation in the Middle East amount to up to $150 million per day. In addition, as a result of supply disruptions from the Middle East, other Russian exports are also becoming more expensive — gas, coal, aluminum, sulfur, nitrogen fertilizers, petrochemical products, and food in the future. That is, an increase in export earnings and a theoretically possible related strengthening of the ruble exchange rate could have a disinflationary effect.
However, it is not certain that this strengthening will be significant, since the impact on the exchange rate of the inflow of oil and gas export earnings is largely offset by the budget rule, which the Ministry of Finance is preparing to tighten to ensure replenishment of the National Welfare Fund, which has lost a lot of weight in recent years. This should support the long-term financial stability of the budget and allow the Central Bank to reduce the key rate more confidently in the medium term.
The negative consequences of the war in the Middle East are the increasing complexity and cost of imports due to the lengthening of routes and rising transportation costs. Imported inflation may increase in Russia, primarily for imports of food, electronics, machinery and equipment, components and medicines. This is reinforced by the observed weakening of the ruble exchange rate. Due to the closure of popular outbound tourism destinations, the imbalance between supply and demand in the domestic tourism market may increase. High export prices for oil and petroleum products can put upward pressure on domestic prices for gasoline and diesel fuel, although this effect is contained due to the damper mechanism.
As a result, the pro-inflationary risks are still more tangible than the disinflationary ones.
"The trend of the ruble falling will continue"
Yulia Khandoshko, CEO of the European broker Mind Money
— The conflict in Iran is not only dragging on, but, apparently, it is also escalating. For the Russian economy, its consequences will be either favorable or, in the worst case, neutral, as Russian fiscal and monetary policies smooth out external pressures. The main mechanism that makes it possible to offset the influence of external factors in this case is the fuel damper, which equalizes gasoline prices. In the USA, for example, pricing in the fuel market is free, so gasoline there has already jumped by 25%.
In Russia, there are special rules that provide subsidies for refineries and fees from them, depending on the current oil price. They keep fuel prices at the same level and prevent sudden spikes due to fluctuations in global markets. Therefore, the rise in oil prices will not affect the overall inflation rate, as it depends on other factors, such as budget spending and the key interest rate.
A strengthened ruble could become a disinflationary factor, but now it also depends little on oil prices and therefore almost does not react to fuel breaking price records. The long-term trend of the ruble falling is likely to continue.
The Russian budget will receive the main benefit from the situation. It now sets the average price of Urals crude oil at $59 per barrel. But in recent weeks, its value has reached $100. This will ease the burden on the budget and help build up reserves in the NWF.
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