Lebanon is confronting mounting inflationary pressures as the ongoing conflict in the region exacerbates an already fragile economic situation, with rising fuel, food, and housing costs threatening to further erode household purchasing power.

By late January, Lebanon’s Consumer Price Index (CPI) had recorded a nearly 11 percent year-on-year increase, despite a relatively stable exchange rate for the Lebanese pound over the past three years. Analysts said this rise in local currency prices reflects higher consumption costs in both Lebanese pounds and U.S. dollars, affecting all wage earners, including those paid in foreign currency or whose salaries were adjusted in the wake of previous economic crises.

According to Al-Modon, Economic experts warn that the current war will add new inflationary burdens across multiple sectors. Rising global oil prices are driving up fuel costs, which in turn affect nearly all consumer goods and services. The conflict is also expected to further inflate housing and rental prices due to increased displacement, as well as food costs, as shipping expenses rise and local production in affected areas declines. The relative impact of each factor depends on its share of the average household consumption basket, as measured by Lebanon’s Central Administration of Statistics.

Oil Prices Drive Broader Inflation

Brent crude recently exceeded $100 per barrel, a roughly 40 percent increase over pre-war levels. Despite efforts by U.S. President Donald Trump to reassure global markets, oil prices remain volatile amid disruptions in production and shipments in the Gulf region. U.S. attempts to secure the Strait of Hormuz and protect oil infrastructure in Arab states from Iranian attacks have so far been unsuccessful, leaving global oil prices under pressure.

Prior to the latest escalation, Lebanon’s transportation costs—which largely mirror oil price fluctuations—had fallen slightly, by 0.71 percent year-on-year in January. With the surge in global oil prices, transportation costs are expected to rise sharply. Given that transport accounts for roughly 13 percent of the average household consumption basket, overall inflation could increase by 4 to 5 percentage points if oil prices remain elevated. Fuel cost increases also affect energy prices, including electricity, fuel derivatives, and water, which represent nearly 12 percent of household consumption, amplifying the broader impact on the economy.

Food Prices and Housing Costs Climb

Food costs had already risen 15.14 percent year-on-year by January, exceeding overall inflation by more than four points. Food accounts for roughly 20 percent of the household consumption basket, and the current conflict is expected to push prices even higher. Rising oil prices increase production and shipping costs, while widespread production disruptions in southern Lebanon and the northern Bekaa further constrain supply. If food prices rise an additional five percentage points, overall inflation could increase by approximately one point.

The housing market has also been under pressure. Rental costs rose 23.17 percent year-on-year by January, driven by post-conflict demand and widespread destruction of residential units following the 2024 war. Current displacement further fuels demand: government estimates place the number of displaced people at 816,700, with 125,800 housed in official shelters. The remaining roughly 691,000 displaced are living in private accommodations outside targeted areas, increasing rental demand and costs.

Impact on Lebanese Households

The combined effect of rising fuel, food, and housing costs is expected to push poverty rates higher, as households struggle to afford basic necessities. These inflationary pressures will compound other war-related economic consequences, including rising unemployment, decreased economic activity, and declining local production. Experts warn that these developments could deepen social disparities across the country, highlighting the urgent need for public policies to address Lebanon’s growing economic and humanitarian crisis.