Citi economists have dropped their call for two interest rate hikes by the Reserve Bank of India through March 2027. The reason: a US-Iran peace deal that has taken the heat out of oil prices, and by extension, out of India’s inflation outlook.
India imports roughly 85% of its crude oil, making it one of the most energy-price-sensitive major economies on the planet. When oil spikes, India’s inflation follows like a shadow.
What the US-Iran deal changes
The US-Iran agreement, announced around mid-June 2026, centered on reopening the Strait of Hormuz to normal trade flows and adjusting sanctions on Iranian oil exports. For context, roughly 20% of the world’s oil passes through the Strait of Hormuz on any given day.
In the wake of the deal, oil prices have fallen to multi-month lows. Earlier projections, including estimates that inflation could climb toward 4.9%, now look overstated given the changed energy landscape.
