March showed how a distant conflict reaches into a Ukrainian driver's pocket. Fuel prices rose by 14% — almost exactly within the National Bank of Ukraine's forecast (12–16%). This is no coincidence; it is a mechanism.
How the National Bank Calculates
National Bank of Ukraine Deputy Governor Volodymyr Lepushynskyi explained the chain: direct fuel price increases will add 0.5–1 percentage point to annual inflation. But this is only the first blow.
«Secondary effects materialize through the transmission of oil and fuel price increases to transportation with a lag of one to two months, and then directly to the cost of goods and services».
Volodymyr Lepushynskyi, Deputy Governor of the National Bank of Ukraine
Secondary effects — more expensive logistics, more expensive production — can be twice as large: another 1–2 percentage points on top. In total — up to 3 p.p. to inflation from just one external shock. The agricultural sector is for now in a buffer: farmers purchased supplies earlier at lower prices, but this protection is temporary.
The Strait of Hormuz as a Counter
Through this 54-kilometer strait between Iran and Oman passes 20% of global oil and gas supplies — approximately 16.5 million barrels per day. After U.S. and Israeli strikes against Iran, Brent futures exceeded $100 per barrel on March 9 for the first time since 2022. Insurance clubs NorthStandard and P&I Club warned of suspension of coverage for vessels in Iranian waters — this is another price multiplier for any tanker passing through the region.
For Ukraine, the arithmetic of the trade balance looks like this: if prices remain high, the negative effect will amount to $1.5 to $3 billion per year solely from more expensive gas and petroleum products, with another approximately $140 million added by increases in other import items.
What Is Not in the Forecast
The National Bank of Ukraine assesses the base scenario — without escalation. But analyst Prianka Sachdeva from Phillip Nova warns: «Even if the war ends, damage to infrastructure could take oil offline for months, not days». In other words, even a ceasefire will not immediately lift price pressure.
- March's fuel price increase already contributed 0.4 p.p. to annual inflation — and this is just the beginning.
- The lag between fuel price increases and price growth in stores is 1–2 months.
- The agricultural buffer from early purchases will melt away by next season's planting.
If the Strait of Hormuz remains a zone of active conflict through autumn, will the National Bank revise its inflation forecast for 2025 upward — and how will this affect decisions on the policy rate?
