NBU Estimates Fuel Price Surge Impact on Inflation Amid Iran Conflict

The National Bank of Ukraine (NBU) has released its latest report estimating that the impact of rising fuel prices, triggered by ongoing events in the Middle East, may lead to an increase in inflation in Ukraine by 0.5 to 1 percentage point (p.p.) in 2026. This information was shared by NBU Deputy Chairman Volodymyr Lepushynskyi in an interview with the Interfax-Ukraine news agency. He also highlighted that secondary effects resulting from this price hike could contribute an additional 1 to 2 p.p. to the overall inflation rate.

Lepushynskyi emphasized that the NBU's forecasts are currently on track. In March 2026, the regulator had anticipated a monthly fuel price increase of 12-16%, while the actual rise was recorded at 14%. This increase contributed 0.4 percentage points to the annual inflation rate in March. According to the NBU Deputy Chairman, the indirect effects of fuel price hikes could be twice as significant and may manifest over an extended period.

Furthermore, Lepushynskyi noted that upon further analysis, the overall impact of rising fuel prices this year could range from 0.5 to 1 p.p., with secondary effects potentially adding another 1 to 2 p.p. These secondary effects are expected to materialize through the transfer of increased oil and fuel prices to transportation costs, which may take one to two months to fully reflect, and subsequently affect the prices of goods and services. In the agricultural sector, this process may take longer, as farmers had previously purchased fuel at lower prices.

In addition, Lepushynskyi pointed out that the events in the Middle East are also negatively affecting Ukraine's trade balance due to rising prices for gas and petroleum products. Should high energy prices persist, the adverse effect on Ukraine's economy could amount to between 1.5 to 3 billion dollars annually. Additionally, the rising cost of fertilizers could contribute approximately 140 million dollars to this total.

At the same time, according to the NBU representative, higher prices for agricultural products may serve as a compensatory factor for the economy, as demand for these products is expected to remain stable. If global food prices continue to rise, this could provide support to the Ukrainian economy amid ongoing instability.

Among the additional risks that could impact the economic situation in Ukraine, Lepushynskyi highlighted the increased fiscal space for Russia due to more expensive energy resources, as well as the potential slowdown of economies in European Union countries, which could negatively affect Ukraine's economy. Nevertheless, the NBU is actively working on synchronizing sanctions and has already achieved alignment on several sanction packages from the EU, Canada, the United Kingdom, Japan, and the United States.

It is worth noting that in its January inflation report, the NBU projected a slowdown in inflation to 7.5% by the end of 2026, further decreasing to 6% in 2027, and returning to the target of 5% by 2028.