The war in the Middle East has driven a significant rise in retail fuel prices in Sri Lanka, in turn doubling food inflation and pushing transport costs even higher in the first half of 2026, according to the Central Bank. Food prices bore the brunt, with food inflation nearly doubling to 6.3% in July from 3.6% in June. Transport fared worse still, up 17.2%, more than double the overall inflation rate, which stands at 7.3% in July, above the Central Bank’s 5% target.
The five biggest price increases this year are all fuel. Furnace oil is up 70%, kerosene 57%, petrol 48%, diesel 46% and LP gas 38% from January to June, according to data from the Department of Census and Statistics analysed by investment bank CAL that tracked price changes across 17 house hold staples. The Ceylon Petroleum Corporation attributes the increases to rising global crude oil costs tied to the war between the US and Iran, which disrupted oil shipping through the Middle East.
Other items on CAL’s list moved too, at a smaller scale. Electricity bills are up 7.5%, after the Ceylon Electricity Board cited rising fuel and coal costs in two tariff requests this year. Public transport is up 12% for the same reason. Fish is up 28%, vegetables 16% and fresh milk 8%. Cars like the Suzuki Alto are up 7%, car servicing and lab tests both 8%, and cement 20%. Detergent, soap and bread barely shifted, rising between 1% and 4%. LP gas tells its own story too: a 12.5-kilogram cylinder from state supplier Litro is up 29% since January, while the same size from privately run Laugfs is up 47%.
The Central Bank expects inflation to stay above its 5% target in the near term, easing toward that level later on. But it warned the war in the Middle East remains a key risk to that outlook.