Brent crude tops USD 90, reviving India's energy shock risks; rupee, FPI flows in focus
New Delhi, July 20
Rising crude oil prices have renewed concerns over inflation and India's exposure to an energy shock, which could impact the rupee and foreign portfolio investment flows.
Brent crude futures rose USD 2.69, or 3.05 per cent, to USD 90.79 per barrel by 2343 GMT, the highest level since June 11. The benchmark has gained 15.9 per cent over the past week, marking its biggest weekly rise since April. At the time of reporting, Brent crude was trading at around USD 90.42 per barrel, while WTI crude was at around USD 84.47 per barrel.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said, "There are near-term headwinds and tailwinds for the market now. The strongest headwind is Brent crude spiking above $90 on escalating tensions between US and Iran. If this trend continues, India's vulnerability to energy shock will resurface with negative implications for the rupee and FPI flows."
Highlighting the rise in oil prices, Bank of Baroda said in a report that "inflationary concerns have resurfaced."
The report added that expectations of a US Federal Reserve rate hike have increased after Cleveland Fed President indicated that higher interest rates may be needed to control inflation. It noted, "probability of a rate hike in Sep'26 have increased to 52.4% versus 47% on 16 Jul 2026. Separately, industrial production in the US increased at a steady rate of 0.1% in May'26 on a MoM basis," it said.
On the currency market, the report said global currencies traded in a narrow range amid rising US-Iran tensions, with the British pound weakening the most. It added, "INR appreciated marginally despite higher oil prices. However, it is trading weaker today, in line with other Asian currencies," BoB noted.
Devarsh Vakil, Head of Prime Research at HDFC Securities, said, "US markets saw heightened volatility this week as a multi-front convergence -- renewed U.S.-Iran conflict, a tech sector rotation, and closely watched inflation data -- pushed major indexes lower, snapping a brief mid-summer winning streak."
Referring to the rise in oil prices, Vakil said, "The latest advance followed another escalation in the conflict, with the United States and Iran exchanging fresh attacks over the weekend."
He added, "Tehran said the ceasefire between the two countries had effectively broken down, increasing fears that disruptions to one of the world's busiest oil shipping routes could intensify."
— ANI
Reader Comments
The global interconnectedness of energy markets is fascinating yet terrifying. A conflict in the Gulf directly impacts FPIs in India. I hope our central bank is preparing measures to stabilize the rupee if this escalates.
Here we go again. Just when we thought inflation was cooling, oil prices spike. The RBI should be ready to step in, but honestly, we need a long-term energy strategy that doesn't leave us at the mercy of global conflicts. Arre yaar, it's always something! 🤦♀️
The US-Iran tensions are a perfect storm for oil prices. I'm watching the rupee closely in the next few weeks. For India, which imports 80% of its oil, this could mean higher inflation and pressure on the current account deficit.
As someone who drives a cab for a living, this news scares me. Last time oil crossed $90, my daily earnings dropped by 20% after fuel costs. The government talks about electric vehicles, but where's the infrastructure for us small drivers? 🚕💨
Interesting how the markets react to political tensions. The 52.4% probability of a Fed rate hike in September could also strengthen the dollar, putting more pressure on emerging markets like India. It's a double whammy for FPI flows.
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