Fresh tensions between Iran and Israel triggered sharp moves in oil and currency markets on Monday, pushing Brent crude above $96 a barrel and sending the Indian rupee to 95.32 against the US dollar.
The rupee opened at 95.32, down 38 paise from Friday’s close of 94.94, as investors reacted to rising geopolitical risks and concerns over higher oil imports.
The market turmoil followed Israeli airstrikes on Beirut targeting Hezbollah and a large-scale Iranian ballistic missile response late Sunday, dimming hopes of a ceasefire.
Oil prices climb
Brent crude futures rose 3.3% to $96.15 a barrel in early trade. During the session, prices briefly touched $97.70, marking the strongest one-day rise in more than a month.
West Texas Intermediate (WTI) climbed 4.5% to above $94.70 a barrel.
Concerns have centred on the Strait of Hormuz, a key route for Persian Gulf oil shipments.
Market participants fear disruptions to commercial shipping could restrict supplies regardless of production decisions elsewhere.
OPEC+ move fails to calm markets
On Sunday, OPEC+ approved an emergency production increase of 188,000 barrels per day for July.
However, analysts questioned whether the additional supply could reach the market if shipping routes remain constrained.
Oil prices continued to rise despite the announcement.
Dollar strengthens
The US Dollar Index held around the 100 level, its highest reading in two months.
Two factors supported the dollar:
- Safe-haven demand amid a global risk-off mood.
- Stronger-than-expected US jobs data.
The US economy added 172,000 jobs in May, compared with market expectations of 85,000.
The data strengthened expectations of a more hawkish stance from the Federal Reserve.
Pressure on the rupee
India imports around 87% of its crude oil requirements.
Higher oil prices and a stronger dollar have raised concerns over the country’s trade deficit and accelerated foreign institutional investor outflows from equities.
The combination of both factors has added pressure on the rupee.
Sectors facing higher costs
Companies with dollar-linked expenses or liabilities could face rising costs if crude prices remain elevated.
Sectors exposed to imported inputs include:
- Airlines
- Oil refiners
- Chemical manufacturers
- Capital equipment importers
InterGlobe Aviation, which operates IndiGo, reported a net loss of ₹2,400 crore in FY26. Management had pointed to higher jet fuel costs, foreign currency lease liabilities and the impact of a weaker rupee.
Whether the pressure affects first-quarter FY27 earnings will depend on the direction of oil prices in the coming weeks.
Asian markets decline
Equity markets across Asia reflected the risk-off sentiment.
- South Korea’s KOSPI fell between 5.39% and 9%.
- Japan’s Nikkei 225 declined 3.74%.
Diplomatic efforts remain stalled, with international leaders calling for restraint from both sides.
Brokerages have begun adjusting their forecasts to account for a longer period of elevated energy prices.
TL;DR:
Brent crude rose above $96 a barrel and the rupee weakened to 95.32 per dollar after renewed Iran-Israel tensions sparked concerns over oil supply disruptions and triggered a broader risk-off move.
AI summary
- Brent crude climbed above $96 a barrel.
- The rupee fell 38 paise to 95.32 against the dollar.
- Tensions between Iran and Israel reignited over the weekend.
- OPEC+ approved a 188,000 bpd output increase for July.
- Asian stock markets declined amid risk-off sentiment.
