Page 18 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

For countries heavily dependent on imported crude oil, including India, persistently high oil prices may
increase import bills, pressure exchange rates, and constrain fiscal and monetary policy flexibility.

Despite recent diplomatic progress, S&P Global notes that the global oil market remains highly sensitive
to geopolitical developments. Any delays in restoring Gulf production, renewed disruptions to maritime
trade routes, or further geopolitical escalation could prolong supply tightness and maintain upward
pressure on international energy prices.

4. Commodity Inflation Continues to Pose Global Risks - S&P Global Market Intelligence

While headline inflation has moderated across several economies following aggressive monetary
tightening over the past two years, underlying cost pressures remain elevated due to persistent increases
in commodity and industrial input prices. According to S&P Global, producer price inflation accelerated
during March and April 2026, indicating that businesses continue to face significant increases in
production costs despite some moderation in consumer price inflation. Rising prices of petrochemicals,
industrial metals, and other intermediate goods have continued to exert upward pressure across global
manufacturing and industrial supply chains.

S&P Global expects its Materials Price Index (excluding energy) to increase by more than 20 % during
2026, reflecting continued supply disruptions, higher logistics costs, and stronger demand for critical
industrial materials such as copper and petrochemicals. In addition, climate-related risks, including the
potential effects of El Niño on agricultural production, could further increase food and commodity prices
during the second half of the year. These developments are expected to sustain cost-push inflation across
several sectors, particularly refining, chemicals, fertilizers, construction materials, and heavy
manufacturing. Copper, lithium, nickel and rare earth minerals continue to experience structurally
stronger demand owing to the global energy transition.

The report also notes that inflationary pressures are becoming increasingly broad-based. While energy
remains the principal driver of price increases, supply constraints across industrial raw materials and
higher freight costs are contributing to persistent inflation in manufacturing inputs. These developments
could delay the pace of monetary easing across several economies and continue to weigh on investment
decisions, industrial competitiveness, and global economic growth.

5. El Niño Poses Emerging Risks to Global Inflation, Food Security and Energy Markets – S&P Global

Climate-related risks are expected to become an increasingly important factor shaping the global
economic outlook during 2026. According to recent assessments by the World Bank and S&P Global, the
emergence of El Niño conditions poses significant upside risks to inflation, agricultural production,
commodity markets, and energy security at a time when the global economy is already grappling with
elevated geopolitical uncertainty and volatile energy prices. While headline inflation has moderated
across many economies, weather-induced supply disruptions could slow the pace of disinflation and add
fresh pressures to food and energy markets.

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