Synopsis: Crude oil held near $91 a barrel and was on track for a weekly gain of over 12 percent as the US carried out a 13th straight day of strikes on Iran, while the rupee opened 6 paise weaker at 96.63 and risks breaching its record low as Brent approaches the $100 mark.
Before the current conflict, roughly 15 million barrels of Persian Gulf oil moved through the Strait of Hormuz each day. With Iran’s effective chokehold over the strait now dragging into its second week, oil-producing nations across the Gulf are moving to permanently reduce their dependence on the waterway, planning to spend billions of dollars on pipeline infrastructure that would redirect supplies toward the Red Sea, Suez Canal and Gulf of Oman instead.
At least seven major pipeline projects are currently under construction, in planning, or under active discussion, according to government officials, oil companies and analysts. Kpler senior researcher Victoria Grabenwoger said continued heavy reliance on the Strait of Hormuz is no longer a prudent long-term strategy for Gulf producers, even though building out alternative routes will take time and add cost.
Saudi Arabia already operates one such workaround: the East-West pipeline built in the 1980s amid fears Iran would disrupt Hormuz shipping during the Iran-Iraq war, which carries crude from a processing facility at Abqaiq across the desert to Yanbu on the Red Sea coast, where it can be loaded onto tankers heading either south to the Arabian Sea or north through the Suez Canal. Without that existing infrastructure, the current disruption to Hormuz would likely have delivered an even sharper shock to global oil markets.
However, alternative routes are proving far from immune to the conflict themselves. Iran-backed Houthi rebels in Yemen this week declared a blockade on Saudi-linked vessels attempting to transit the Red Sea, striking two Saudi oil tankers directly, underscoring that rerouting around Hormuz does not fully insulate Gulf exports from the wider regional conflict. Separately, the Caspian Pipeline Consortium suspended crude loadings at its Black Sea terminal following tanker attacks, disrupting roughly 80 percent of Kazakhstan’s oil exports and adding a further source of global supply pressure well beyond the Gulf itself.
Oil Rally Extends as US Escalates Rhetoric
Crude oil traded above $91 a barrel on Friday, with WTI at $90.53 and Brent at $98.995, putting the market on track for a weekly gain exceeding 12 percent. The rally came as the US launched its 13th consecutive day of strikes on Iran, with both sides ruling out near-term talks.
President Trump escalated his rhetoric further, threatening “major military punishment” against both Iran and Houthi forces over any additional attacks on Red Sea shipping, and stating he was considering a large-scale strike on Tehran. His comments followed the Houthi attacks on the two Saudi tankers, which have forced Asian buyers to begin discussing rerouting Saudi crude shipments around Africa via the Suez Canal, a far longer and more expensive path than direct Gulf shipments.
Beyond crude, the broader energy complex showed mixed moves, with natural gas down about 1 percent, gasoline down 1.78 percent, and heating oil down 1.11 percent on the day, even as all remain sharply higher on a monthly and yearly basis, reflecting how dramatically the conflict has reshaped energy pricing over the past several weeks.
Rupee Under Renewed Pressure, Risks Record Low
The Indian rupee opened 6 paise weaker at 96.63 against the US dollar on Friday, as the sharp rally in crude prices intensified concerns over India’s external balances and inflation outlook. With Brent now closing in on the $100 mark, the currency is at risk of breaching its record low.
The reversal is particularly sharp given the rupee had been strengthening toward the 94-per-dollar mark just weeks earlier, when Brent was trading near $70 a barrel and optimism around the Reserve Bank of India’s capital inflow measures had improved sentiment. That improvement, which had supported debt inflows and helped moderate foreign equity outflows, now risks being overshadowed entirely by the renewed oil price surge.
As the world’s third-largest crude importer, India remains especially exposed to higher energy prices, which widen the current account deficit, stoke inflation and increase dollar demand. Compounding the pressure, the US 10-year Treasury yield has climbed to around 4.70 percent on renewed inflation concerns, driving a broader shift toward safe-haven assets that is weighing on emerging market currencies including the rupee.
Adding a further layer of uncertainty, the temporary tariff arrangement between India and the US, which includes an additional 10 percent US duty on certain Indian exports, was due to expire on July 24, with negotiations reportedly still ongoing. A successful agreement could offer relief for exporters and sentiment, while any delay would add to the currency’s existing burden from oil and geopolitical risk.
Amit Pabari, Managing Director of CR Forex Advisors’ research team, said crude oil has moved in line with the firm’s expectations and the rupee is likely to follow the same trajectory, with USD/INR expected to move beyond 97.00 and potentially toward 97.50 in the near term given Brent’s approach toward $100 and continued elevated geopolitical risk.
Why It Matters for India
The combination of a rupee sliding toward record lows and crude approaching $100 a barrel represents a particularly difficult setup for Indian policymakers, since the two pressures reinforce each other: a weaker rupee makes India’s dollar-denominated oil import bill even more expensive in rupee terms, which in turn adds further downward pressure on the currency. Sectors reliant on crude-linked inputs, including aviation, paints, chemicals and logistics, face intensifying margin pressure the longer this dynamic persists, while the RBI’s room to intervene may be increasingly tested given how quickly conditions have deteriorated from the relative calm seen just weeks ago.
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