The Indian rupee is expected to open weaker on Tuesday in the 95.35–95.40 range against the US dollar, pressured by rising oil prices linked to the stalled US-Iran peace talks and growing uncertainty over the Strait of Hormuz. The rupee settled around 95.30 on Monday after trading in a roughly 95.10–95.30 band over the prior three sessions, with persistent dollar demand keeping the currency under pressure even as the Reserve Bank of India stepped in to cap losses.

The rupee's weakness reflects a fairly direct read-through of the broader oil-driven risk premium building around the Hormuz standoff. Brent crude's advance toward the $88-per-barrel level is adding fresh pressure on India's import bill and currency — a particularly acute vulnerability given that India imports more than 80% of its crude oil requirements, making it one of the world's largest oil importers. Brent rose approximately 5% on Monday amid the deadlock in US-Iran negotiations and uncertainty over the possible reopening of the strait, with gains extending into Asian trading on Tuesday.

The oil market remains highly sensitive to any headline flow related to the standoff. The Strait of Hormuz, through which roughly a fifth of global daily oil consumption transits, has long been a flashpoint for energy markets; any disruption to shipping through the waterway would constrict supply to major Asian buyers including India. On Monday, President Trump responded to Iran's list of demands with his own set of counter-conditions, leaving the situation unresolved and contributing to sustained upward pressure on crude prices.

The rise in oil prices has also had a knock-on effect in bond markets. The US 10-year Treasury yield climbed to around 4.70%, reversing the decline that followed last week's softer-than-expected US jobs data. That move higher in yields makes dollar-denominated assets more attractive, adding a second headwind for the rupee just as elevated oil prices push importer demand for dollars higher.

On Monday, the RBI likely sold dollars near the 95.25 level, though the rupee still slipped further — a reflection of pressure from importer hedging activity and higher oil costs. The RBI's capacity to sustain such intervention is underpinned by India's foreign exchange reserves, which rank among the largest in the world and serve as the primary buffer against currency volatility. One currency trader at a bank said the RBI has been consistently on the offer in the dollar-rupee pair, adding that without that support the pair would already be trading well past 95.50. The trader expects Tuesday to follow a similar pattern, with underlying dollar demand once again needing to be absorbed by the central bank.

The RBI's consistent dollar selling near current levels is doing the heavy lifting in capping losses, underscoring how reliant the rupee is on central bank intervention rather than any independent strength. With the oil market remaining highly sensitive to any Hormuz-related developments, including the latest diplomatic maneuvering between Washington and Tehran, the rupee's near-term path looks tightly linked to how that standoff evolves rather than to any domestic driver.

Info via Reuters.