HUAIAN, CHINA – MARCH 09: Vehicles queue at a petrol station on March 9, 2026 in Huaian, Jiangsu Province of China.
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 moderated in March, amid a surge in oil prices as the Iran war upended global energy markets.
The consumer price index climbed 1% in March from a year earlier, missing economists’ forecast for a 1.2% growth 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 climbed 0.5% from a year earlier, the first growth since September 2022, ending their longest deflationary streak in decades.
The war between the U.S. and Iran, now in its sixth week, has pushed oil prices sharply after Tehran effectively closed the Strait of Hormuz to most commercial tankers and major Middle East producers curbed oil production.
The international benchmark Brent June contract was at $96.7 a barrel on Friday, after a 33% rally since the war began on Feb 28. U.S. WTI crude futures for May delivery were at $98.5 per barrel, up 47% compared to pre-war levels.
China, the world’s largest oil importer, faces possible inflationary spillovers, though its massive strategic stockpiling onshore and diversified sources of energy provided some cushion to the economy.
“China fares better than its peers amid a sizable yet not extreme oil shock, given its energy fungibility and policy flexibility with low starting inflation,” said Robin Xing, chief China economist at Morgan Stanley, estimating the country’s PPI to rise 1.2% in 2026, CPI 0.8%.
The Wall Street bank cuts its forecast for China’s GDP growth this year by 10 basis points to 4.7%, on the premise that oil averages $110 a barrel in the second quarter before receding.
Should the Mideast conflict continue to deteriorate, pushing oil prices above $150 per barrel through Q2, China’s real GDP may slow to 4.2% this year, according to the Wall Street bank. “Even if the Strait reopens, slow supply normalization and inventory rebuilding could keep oil prices elevated,” Xing said.
In a sign of pressure already mounting, China’s top economic planning agency on Tuesday, once again, raised retail prices for gasoline and diesel by 420 yuan ($61.18) and 400 yuan per metric ton, respectively. Last month, policymakers raised prices by 1,160 yuan and 1,115 yuan per ton.
The upheaval in oil markets has the potential to alter the calculus for policymakers as economists warned that input-cost shock could spark “bad inflation” in the economy, further squeezing manufacturers’ already-thin profit margins.
The People’s Bank of China reaffirmed its cautious monetary easing stance in a quarterly meeting last month, dampening hopes for interest rate cuts this year. The central bank delivered only one 10-basis-point reduction in the policy interest rate in 2025.
Yield on China’s 10-year government bonds held relatively steady even amid lingering concerns about elevated oil prices, standing at 1.814% on Friday.