HUIYAN, CHINA – MARCH 09: Vehicles queue at a petrol station in Huai’an, Jiangsu province, China on March 9, 2026.
Zhao Qirui Visual China Group | getty images
China’s factory-gate prices rose for the first time in more than three years, while consumer inflation eased in March amid a rise in oil prices offset by a slump in global energy markets caused by the Iran war.
The consumer price index climbed 1% in March from a year earlier, missing economists’ forecast of a 1.2% rise in a Reuters poll and slowing from a 1.3% rise in February, according to data released by the National Bureau of Statistics on Friday.
Producer prices rose 0.5% from a year earlier, the first rise since September 2022, ending their longest deflation streak in decades.
The war between the US and Iran, now in its sixth week, has sent oil prices rising sharply after Tehran effectively closed the Strait of Hormuz to most commercial tankers and curbs on oil output by major Middle East producers.
international benchmark brent The June contract was at $96.7 a barrel on Friday after rising 33% since the war began on Feb. 28. US WTI Crude oil futures for May delivery were at $98.5 a barrel, 47% higher than pre-war levels.
China, the world’s largest oil importer, is facing the impact of potential inflation, although its massive strategic reserves and diverse sources of energy have provided some relief to the economy.
“China is performing better than its peers amid the big oil shock, but given its energy substitutability and policy flexibility along with low headline inflation, the country’s PPI is projected to grow 1.2% in 2026, CPI 0.8%,” said Robin Xing, chief China economist at Morgan Stanley.
The Wall Street bank cut its forecast for China’s GDP growth this year by 10 basis points to 4.7%, on the basis that oil prices average $110 a barrel before falling in the second quarter.
If conflict in the Middle East continues and oil prices rise above $150 a barrel in the second quarter, China’s real GDP could slow by 4.2% this year, according to the Wall Street bank. “Even if the Strait reopens, slow supply normalization and inventory rebuilding may keep oil prices high,” Xing said.
In a sign of already mounting pressure, China’s top economic planning agency once again on Tuesday, Retail prices of petrol and diesel were increased Up to 420 yuan ($61.18) and 400 yuan per metric ton, respectively. Last month, policymakers raised prices to 1,160 yuan and 1,115 yuan per ton.
Turbulence in oil markets has the potential to change the calculus for policymakers as economists warn that input-cost shocks could lead to “bad inflation” in the economy, further squeezing producers’ already thin profit margins.
The People’s Bank of China reaffirmed its cautious monetary easing stance at a quarterly meeting last month, reducing expectations for an interest rate cut this year. The central bank only cut the policy interest rate by 10-basis-point in 2025.
Yields on China’s 10-year government bonds remained relatively stable at 1.814% on Friday, even amid continuing concerns over higher oil prices.
