Persistent US-Iran standoff and closed Strait of Hormuz sustain elevated oil prices, pressuring the INR and supporting USD strength.
The Indian rupee extended losses as escalating US-Iran tensions and a prolonged closure of the Strait of Hormuz kept oil prices elevated. The stalemate in negotiations dims prospects for a near-term reopening, sustaining pressure on energy markets and emerging market currencies like the INR.
Recent clashes, including Iranian strikes on US bases in the Gulf, have reinforced USD demand amid safe-haven flows. Markets now expect the Fed to maintain a hawkish stance ahead of the June FOMC meeting, with rate cut bets fading as oil-driven inflation risks persist.
A resolution could reverse USD gains and ease oil prices, but prolonged tensions may force the Fed to consider tighter policy, further supporting the greenback.