Indian assets declined on Thursday and the rupee fell to a record low, as a fresh surge in crude prices reignited worries over the economic impact of energy supply disruptions, even as central bank intervention helped cushion the currency's fall.
Brent crude oil prices climbed to $100 per barrel as Iran stepped up attacks on oil and transport facilities across the Middle East, warning the world to brace for oil at $200 a barrel.
The rupee fell 0.3% to 92.3575, eclipsing its previous lifetime low of 92.3475 hit earlier this week.
India's benchmark equity index Nifty 50 fell about 1%, the yield on the benchmark 10-year bond rose 4 bps, and the rupee averted steeper losses largely on the back of central bank intervention, traders said.
Asian currencies weakened across the board, while MSCI's gauge of regional stocks fell more than 1.5%.
"We expect the RBI to intervene in 92.30-92.35. However if Brent continues to remain elevated for a couple of sessions, the RBI may have to let the rupee go," said Abhishek Goenka, chief executive at FX advisory firm IFA Global.
The pressure on the rupee was also evident in hedging markets. The 1-year implied hedging cost climbed above 3% for the first time since December 2025, the 1-month implied volatility - a gauge of future expectations - hovered near its highest level since May last year.
Asian currencies were down between 0.1% and 0.7%, while regional stocks fell more than 1.5%.
"A number of major Asian currencies stand to be amongst the most negatively impacted by the current shock both due to large existing energy trade balance deficits... (and) their key dependencies on energy flows from the Strait of Hormuz specifically," analysts at Goldman Sachs said in a note.
Morgan Stanley said India is also the most exposed Asian economies to end-demand for exports, adding growth risks on top of the inflation threat from higher energy prices.
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