Heat oil in a large pot over medium heat. Sauté onion and garlic until fragrant, about 3-4 minutes.
Add curry powder, cinnamon, turmeric, pepper, sugar, chili oil, and soy sauce. Stir for 1-2 minutes until aromatic.
Add lemongrass, carrots, potatoes, and mushrooms. Toss to coat with spice mixture.
Pour in water and coconut milk, bring to a gentle simmer.
Add tofu cubes and cook for 20-25 minutes until vegetables are tender.
Remove lemongrass stalks before serving.
Garnish with fresh cilantro and serve with rice or bread.