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Message: <blockquote data-quote="snm1990" data-source="post: 31267572" data-attributes="member: 537633">From Claude<h2>Near-Term Outlook (Next 1–3 Months)</h2>Fuel prices will rise domestically. The only question is how much. CPC currently maintains approximately one month of fuel stocks <a href="https://island.lk/oil-prices-rise-after-ships-attacked-near-strait-of-hormuz/" target="_blank">The Island</a>, which provides a brief buffer. But if Brent sustains above $90–100, domestic price hikes become inevitable within weeks. Panic buying has already started — fuel queues re-emerged across Sri Lanka due to panic buying triggered by the conflict. <a href="https://srilankachronicle.com/oil-shock-math-what-sri-lanka-now-pays/" target="_blank">FINANCIAL CHRONICLE</a>The rupee will come under pressure. The combination of higher import bills and potentially reduced remittance flows creates a classic twin pressure on forex reserves. The Central Bank will face the difficult choice between defending the currency (burning reserves) or letting it depreciate (fueling inflation).The IMF program becomes harder to maintain. Sri Lanka's post-2022 recovery has been anchored on IMF conditions — fiscal discipline, reserve accumulation, controlled inflation. An external oil shock of this magnitude tests every one of those parameters simultaneously.<h2>Medium-Term Risks (3–12 Months)</h2>If the conflict drags on (Trump himself said possibly four weeks of combat operations, but history shows these things always last longer than predicted):Mass repatriation scenario. If Gulf infrastructure continues to be hit, a large-scale return of Sri Lankan workers becomes possible. Any large-scale evacuation would sever the monthly cash flow that stabilizes the rupee, reigniting the cost-of-living crisis and threatening debt repayment under the IMF program. <a href="https://srilankachronicle.com/us-israel-strike-on-iran-jeopardizes-sri-lanka-s-fragile-recovery/" target="_blank">FINANCIAL CHRONICLE</a> Absorbing hundreds of thousands of returnees into an already saturated domestic job market would create enormous social pressure.Debt sustainability questions resurface. Sri Lanka only recently restructured its sovereign debt. Creditors were willing to accept haircuts based on recovery projections that assumed a stable external environment. A prolonged oil shock fundamentally alters those projections.Inflation returns. The 1.6% February reading becomes a memory. Transport costs, cooking gas, electricity — everything linked to petroleum — reprices upward. Food prices follow as logistics costs rise.</blockquote>

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