Synopsis: Crude oil is on track for its steepest weekly gain since April, with prices climbing over 10% this week as US strikes on Iran entered a sixth consecutive night, while the Indian rupee held near an eight-week low around 96.46 against the dollar as the Strait of Hormuz standoff continues to reshape currency and energy markets.
Brent crude traded around $85.06 a barrel on Friday, up about 1% on the day, while WTI climbed 1.2% to $79.88, with both benchmarks on pace for a roughly 12% weekly gain, the largest one-week jump since April. Earlier in the week, Brent had briefly topped $86 a barrel as tensions intensified further, with Iran striking two UAE-managed oil supertankers transiting the Strait of Hormuz’s southern lane near Oman, a corridor widely regarded as under US oversight.
The latest escalation came in the early hours of Friday local time, when US forces launched a fresh round of precision strikes on Iranian military targets, marking the sixth consecutive night of American action against Tehran. US Central Command said the strikes hit dozens of targets including coastal surveillance sites, air defence infrastructure, military logistics facilities, and maritime capabilities, stating the campaign was aimed at further degrading Iran’s military capacity and holding the country accountable for recent attacks on commercial shipping.
This follows Thursday’s strike in which US forces disabled an Iran-linked tanker near Kharg Island, Iran’s key oil export terminal, as Washington enforces the naval blockade it reinstated on July 14. The near-total collapse of an earlier ceasefire has effectively halted meaningful traffic through the Strait of Hormuz, tightening Middle East supply just as commodities strategists note the oil market was already vulnerable following steep inventory drawdowns through the second quarter.
Adding to the risk premium, Iran-aligned Houthi forces in Yemen are reportedly awaiting a green light from Iran’s Islamic Revolutionary Guard Corps to potentially close the Bab el-Mandeb Strait, a critical passage for Saudi oil exports through the Red Sea, a move that would open a second major chokepoint to the conflict if activated.
Rupee Holds Near Multi-Week Lows
The Indian rupee was trading around 96.46 against the US dollar on Friday, hovering near the eight-week low it touched earlier this week, as the surge in crude prices continues to weigh on sentiment. The currency remains under pressure even as foreign portfolio investors have turned net buyers this month, purchasing roughly $1.5 billion in Indian equities and $500 million in debt, a reversal that has so far been outweighed by persistent importer dollar demand tied to costlier oil.
The Reserve Bank of India has continued intervening in both spot and non-deliverable forward markets to support the rupee, though traders describe the central bank’s action as relatively measured rather than aggressive. A softer-than-expected US inflation report this week, which reduced near-term expectations of a Federal Reserve rate hike and weakened the dollar broadly, has provided some cushion, helping limit the scale of the rupee’s losses despite the oil-driven pressure.
Ripple Effects Beyond India
The Hormuz disruption is also reshaping energy procurement well beyond India. Pakistan has been forced into some of its most expensive spot LNG purchases in four years, after the renewed blockade cut off scheduled cargoes from its primary term supplier, Qatar. State-controlled Pakistan LNG this week paid approximately $20.70 per million British thermal units for a cargo, the highest price Islamabad has paid since the 2022 European energy crisis following Russia’s invasion of Ukraine.
Pakistani authorities are now reportedly finalising plans to secure at least one additional spot cargo for July delivery and as many as six more for August, as the country moves toward procuring the most spot LNG cargoes in a single month since the Iran conflict began. With no tankers observed exiting the Strait of Hormuz for days, Qatar’s ability to fulfil long-term contracted shipments has been severely disrupted, forcing importers across the region into costlier alternative sourcing.
Why It Matters for India
With India importing close to 85% of its crude requirements, sustained Brent prices above $85 a barrel directly threaten the country’s import bill, current account balance, and inflation trajectory. India’s latest inflation reading has already climbed to 4.38% in June, up from 3.93% previously, and further oil-driven price pressure could complicate the Reserve Bank of India’s policy calculus in the months ahead, even as domestic interest rates have remained steady at 5.25%.
Sectors with high energy input costs, including aviation, paints, chemicals, logistics, and oil marketing companies, face intensifying margin pressure the longer the Hormuz disruption persists, while upstream oil and gas producers stand to benefit from stronger realisations if elevated prices hold. The rupee’s near-term trajectory is likely to remain tightly coupled to oil price movements, with the currency’s ability to sustain any relief hinging largely on whether the US-Iran conflict shows signs of de-escalation in the days ahead.
What to Watch
President Trump has reportedly warned that the US could extend strikes to target Iranian infrastructure directly next week absent a diplomatic breakthrough, a move that would mark a further significant escalation. Markets remain highly sensitive to developments out of the Gulf, with the durability of this week’s sharp oil rally, and by extension the pressure on the rupee and other oil-importing currencies, likely to hinge on whether the conflict draws in additional flashpoints such as the Bab el-Mandeb Strait, or whether diplomatic efforts manage to pull the situation back from further military confrontation.
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