The Indian rupee opened 25 paise lower at 95.52 against the US dollar on Thursday, as renewed hostilities between Iran and the United States pushed crude oil prices sharply higher, reviving concerns over India’s external balance and inflation outlook.
The domestic currency had strengthened to an intraday high of 95.10 on Wednesday, aided by dollar sales from state-run banks, which traders believe were conducted on behalf of the Reserve Bank of India (RBI).
According to a Reuters report, market participants view the intervention as a signal that the RBI is keen to prevent further depreciation of the rupee, following its announcement of a series of measures to support the currency. However, traders noted that sustained stability in the rupee would also require support from other factors, particularly a moderation in crude oil prices.
Meanwhile, Brent crude oil surged to as high as $95.50 per barrel after the United States carried out fresh strikes on multiple targets in Iran overnight, significantly escalating tensions in the region.
In response, Iran announced the closure of the Strait of Hormuz and said it had launched retaliatory attacks on 18 US military targets in Kuwait and Bahrain. The move marks a sharp shift from recent weeks, when Iran had allowed limited passage of vessels from friendly nations through the critical shipping route.
Middle East tensions keep markets on edge
According to market experts, the geopolitical situation has intensified following fresh “self-defence strikes” launched by the US Central Command against multiple targets in Iran. The US described the action as a response to what it called continued Iranian aggression, keeping the Middle East conflict firmly in focus for global investors.
Despite the latest escalation, experts noted that financial markets have remained relatively calm. Oil prices have remained below $ 95 per barrel, suggesting that investors currently view the conflict as a significant risk rather than an immediate threat to global trade flows or energy supplies. The measured market reaction suggests that participants are monitoring developments closely but have not yet priced in a severe disruption scenario.
Inflation, Fed outlook and G7 Summit in focus
Experts also pointed out that recent US inflation data offered few surprises. Headline inflation accelerated to 4.2% from 3.8%, largely due to higher energy prices, while core inflation came in slightly softer than expected on a monthly basis.
The data has done little to alter market expectations, with investors continuing to believe the Federal Reserve will keep interest rates unchanged at its upcoming policy meeting while maintaining a hawkish stance. Market participants broadly expect the central bank to move further away from its earlier easing bias amid elevated inflationary pressures.
On the diplomatic front, attention is shifting to the upcoming G7 Summit, where Prime Minister Narendra Modi is expected to meet President Donald Trump. According to experts, discussions are likely to focus on trade, visa policies, and energy cooperation. While high-level meetings alone rarely move markets, investors will be watching closely for any concrete policy outcomes that could influence economic and investment sentiment.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, the market narrative continues to favour a gradual appreciation of the rupee. From a technical perspective, USDINR remains under pressure at 95.60–95.80. A move below 95.00 may encourage a fresh round of downside momentum, bringing 94.50 into focus initially, with the 94.00–93.80 zone emerging as the next area of interest.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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