Brent crude climbed nearly 3% in Asian trade to just below $84 a barrel, after reaching a peak of $85.12 earlier this week. The spike is tied to ongoing fears of disruptions in the Strait of Hormuz, a critical corridor for global oil shipments, following a US strike on an Iranian warship and heightened geopolitical tensions.
“Right now the rupee is being driven almost entirely by oil. As long as the Middle East conflict keeps crude prices choppy, the pressure is likely to persist,” said a currency trader at a private bank.The US–Iran conflict widened on Wednesday (March 4), with US Senate Republicans backing US President Donald Trump’s military campaign and further military strikes reported, keeping oil markets jittery.
Dollar eases, equities recover
The rebound in the rupee was aided by a softer US dollar. The US Dollar Index slipped below 99, following tentative recovery in global risk appetite. US equities rose on Wednesday (March 4), with Asian markets — led by South Korea and Japan — following suit.
Bankers noted that the rupee’s near-term trajectory remains sensitive to both crude price movements and potential intervention by the Reserve Bank of India after the currency dropped 1.3% over the past two sessions.
Near-term outlook
Analysts said the rebound may be fragile, as any fresh spike in crude prices could offset gains and put renewed pressure on the currency.
Dilip Parmar, Research Analyst at HDFC Securities, said, “While risk sentiment is improving and the dollar has pulled back, the rupee will continue to react sharply to oil prices and geopolitical headlines. Traders should expect heightened volatility in the near term.”
–With Reuters inputs
