West Asia conflict disrupts global oil supplies, driving sharp fuel and food price hikes in import-dependent Nepal, squeezing household budgets and stoking stagflation fears amid stagnant incomes.
Radha Sanjel, an office assistant in Kirtipur, recently paid Rs 2,250 for a 25-kg bag of Pearl brand jeera masino rice, up Rs 250 from a month earlier. Sunflower oil now costs her around Rs 300 per litre, while mustard oil exceeds Rs 400. “Everything is expensive,” she says, as she and her husband stretch their monthly income to cover food, school fees, transport, and healthcare for their family of four.
Sanjel’s story echoes across Nepal. As conflict in West Asia intensifies – particularly disruptions around the Strait of Hormuz – global energy markets have been thrown into turmoil. Nepal, which imports 100 per cent of its refined petroleum products and LPG via India, feels the shockwaves acutely. Diesel prices have surged by about 60 per cent and petrol by 28 per cent over the past three months, while LPG cylinder costs rose 11.5 per cent. Public transport fares jumped nearly 20 per cent, and cargo transportation costs increased by 17 per cent.
Fuel Shockwaves Ripple Through Supply Chains
The Nepal Oil Corporation (NOC) has repeatedly hiked prices, making Nepal one of South Asia’s costliest places to fill a tank. Petrol in Kathmandu reached around NPR 219 per litre and diesel NPR 207 in recent adjustments, driven by international crude spikes linked to attacks and blockades affecting roughly 20-40 per cent of global oil transit through the Strait of Hormuz.
These increases extend far beyond the pump. Higher diesel costs elevate agricultural inputs, transportation, and logistics. Rice prices have climbed Rs 5-10 per kg, partly due to elevated freight and packaging expenses. Plastic packaging materials, petroleum-derived, have jumped 40-50 per cent, adding to the burden on millers and retailers.
Vibor Agrawal of Radha Krishna Rice Mill notes that paddy imported from India rose by Rs 100 per quintal, while packaging costs surged. Nepal imported over 449,000 tonnes of paddy and 219,000 tonnes of rice from India in the first ten months of the fiscal year. Fine rice varieties saw bag prices increase by Rs 50-75 within a week. Edible oil prices followed suit: sunflower oil from Rs 265 to Rs 300 per litre, mustard oil from Rs 350-375 to Rs 460.
Inflation surges as food prices outpace overall index
Nepal Rastra Bank data shows consumer inflation hit 4.47 per cent in mid-April, the highest in 13 months. Food and beverage prices rose faster than the broader index, with ghee/oil up 12.87 per cent, fruits 11.67 per cent, and vegetables 9.18 per cent year-on-year in the first nine months.
Pavitra Bajracharya, president of the Nepal Retailers Association, attributes much of the rise to transport and packaging costs. Global polymer prices climbed due to West Asia tensions, affecting everything from plastic bags to industrial wraps used for rice.
The US dollar’s appreciation against the Nepali rupee further inflates import costs. Fertilizer supplies, with significant origins in West Asia (nearly 49 per cent of global urea exports from the region), face potential shortages and price hikes, threatening the upcoming planting season and future food production.
Economic Vulnerability Exposed
Nepal’s heavy reliance on imports leaves it exposed. The country sources most refined fuel and LPG from India, which itself imports much of its crude through vulnerable routes. Construction faces bitumen shortages, manufacturing costs rise, and tourism grapples with higher jet fuel prices that have doubled some ticket costs and led to cancellations.
Economist Chandra Mani Adhikari describes the situation as stagflation: slowing growth paired with rising inflation. Nepal’s average growth over the past decade hovers around 4 per cent, now projected lower (around 2.3 per cent in some forecasts) due to external shocks. Remittances, projected at 33 per cent of GDP this year, provide a critical buffer but could falter if Gulf economies weaken and migrant opportunities shrink. Over 1.7 million Nepalis work in the Gulf, supplying a large share of overseas earnings.
A UNDP report has warned that Nepal faces high risks of human development losses if the conflict persists, potentially worsening food security through reduced remittances and higher prices.
Prem Lal Maharjan of the National Consumers Forum criticizes the government for insufficient market intervention. “External factors push prices up, but the government appears least concerned about supporting consumers,” he says. Over 60 per cent of household income goes to daily consumables, leaving little room for savings or discretionary spending.
Broader implications for growth, revenue, and livelihoods
Beyond households, government revenue faces pressure as higher costs dampen consumption and economic activity. Weak implementation of policies and political instability have long deterred foreign investment, compounding vulnerabilities.
Analysts urge diversification, accelerated energy transition (including hydropower and EVs), and strategic reserves. Short-term measures like targeted subsidies for the poor or reduced taxes on essentials could provide relief, though fiscal space is limited.
Traders sometimes amplify global shocks for higher margins, but the core drivers are structural: import dependence, thin domestic buffers, and exposure to volatile geopolitics.
As West Asia turmoil drags on, Nepal’s policymakers confront a test. Without proactive steps – bolstering local production, stabilizing supply chains, and supporting vulnerable families – the cost-of-living crisis could deepen inequality and erode living standards for millions. For families like Radha Sanjel’s, the distant conflict in West Asia has become a daily kitchen-table reality.
