The U.S. military plans to strike Iran, oil prices surge to a four-year high, Nasdaq futures give up gains, Asian currencies plunge, and both corn and wheat prices rise.

In Asia, AI-driven market momentum has partially masked the broader impact of the U.S.-Iran conflict. The Korea Composite Stock Price Index (KOSPI) is on track for its best monthly performance since 1998, while Taiwan’s Taiex index is poised for its strongest monthly gain since 2001, with AI supply-chain stocks—such as TSMC—continuing to lead the rally. However, Charu Chanana, Chief Investment Strategist at Saxo Markets, warns: "AI has delivered a structural growth narrative to markets, but rising oil prices are transforming geopolitical risk into structural inflation risk. Given that some tech-sector positions remain relatively crowded, strong earnings alone can no longer fully justify valuations." Mitul Kotecha, Head of Emerging Markets Macro Strategy at Barclays, bluntly states that equity markets have become visibly disconnected from macroeconomic reality: "The renewed euphoria around technology and AI is ignoring all other risks." Multiple Asian currencies hit record lows; central banks’ room for intervention is constrained Oil prices breaching $120 per barrel have placed severe pressure on some of Asia’s most vulnerable currencies. The Indonesian rupiah, Philippine peso, and Indian rupee have all plunged to historic lows—ranking among the worst-performing Asian currencies over the past two months since the outbreak of the U.S.-Iran conflict. On Thursday, both the rupiah and rupee fell more than 0.3% against the U.S. dollar, while the peso edged close to its all-time low. The root cause of this currency pressure lies in these countries’ heavy reliance on imported oil. Soaring energy prices directly amplify inflationary pressures and raise concerns about widening current-account and fiscal deficits—placing central banks in a difficult bind between stabilizing the economy and curbing inflation. Wee Khoon Chong, strategist at BNY, notes that central banks may recalibrate the intensity of their foreign exchange interventions to conserve foreign reserves, with oil prices serving as a key determinant of how aggressively they step in. Central banks have already taken a series of measures. The Reserve Bank of India (RBI) launched a dedicated USD swap window for refiners and restricted banks from offering widely used offshore rupee trading instruments to curb speculation. The Bank of Indonesia announced it stands ready to intensify interventions and tightened rules on foreign-currency purchases to stem capital outflows. Meanwhile, the Bangko Sentral ng Pilipinas signaled willingness to deploy consecutive small interest-rate hikes to rein in inflation. Yet analysts believe these efforts will yield limited results until the outlook for the conflict becomes clearer. Lloyd Chan, strategist at MUFG Bank, wrote in a Thursday report: "More credible de-escalation signals are needed to truly ease depreciation pressure." The yen’s mounting pressure has also drawn market attention. The yen briefly breached the 160-per-dollar level, hitting 160.47—the weakest point of the year—prompting widespread expectations that Japanese authorities may intervene near this threshold. This yen weakness coincides with the Bank of Japan’s decision on Wednesday to hold its policy rate steady at 0.75%, further heightening tensions between monetary policy and market forces. War premium spreads to agricultural commodities, corn leads rally in commodities The Middle East conflict’s impact has extended beyond energy markets into agriculture. Corn futures on the Chicago Board of Trade surged to $4.7925 per bushel—the highest level in nearly four years—and rose for four consecutive days.

What is the long-term impact of the Reserve Bank of India’s foreign exchange market intervention on the rupee’s exchange rate?

This represents the Reserve Bank of India’s (RBI) strongest administrative intervention in the foreign exchange domain in over a decade. Its logic is straightforward: forcibly compress short positions to trigger a short squeeze, thereby pushing up the rupee’s value in the short term. The market responded immediately—short sellers were forced to cover their positions, and the rupee surged sharply at the open. But this ‘masterstroke’ lasted only a few hours. Once the initial wave of covering subsided, the fundamental, rigid demand for dollars—especially from oil importers—reasserted itself. The rupee quickly reversed course, even briefly falling below the previously uncharted 95-rupee-per-dollar threshold. It ultimately closed at 94.81—nearly unchanged from last Friday. The RBI’s administrative decree had rewritten the script—but only for half a day. To understand what happened on March 30, one must first trace back to earlier developments. Since the escalation of Middle East tensions, international oil prices have continued surging, with Brent crude trading well above $110 per barrel—far exceeding the RBI’s benchmark of $70. As the world’s third-largest crude importer, India has virtually no buffer. According to Bloomberg Economics estimates, when oil hits $100 per barrel, India’s monthly import bill swells by roughly $5 billion. Beyond soaring oil prices, global risk aversion has intensified. The Middle East conflict has prompted international investors to reassess risk, casting emerging markets—including India—as high-risk destinations and accelerating capital flight. In March alone, foreign investors sold Indian bonds at a record pace, netting $1.61 billion in outflows; since late February, net foreign sales of Indian equities reached $12.14 billion—the largest single-month outflow on record. On one side: soaring import costs. On the other: accelerating capital flight. Under this dual assault, the rupee entered a sustained and brutal decline. The data tells an unambiguous story. By end-March, the rupee had depreciated over 4% against the U.S. dollar year-to-date, and nearly 10% since the start of the fiscal year. Its 4.04% depreciation in March marked its worst monthly performance since the pandemic in 2020. Among major Asian currencies, the rupee posted the steepest decline—while the yen, won, and baht also weakened, none fell as severely. Even more worrying for markets is that this is not a short-term fluctuation, but a persistent trend: the rupee has set new record lows almost every trading day. Faced with this relentless depreciation, the RBI initially resorted to the most conventional tool—intervening in the foreign exchange market using its foreign reserves. The logic is simple: sell dollars and buy rupees to artificially boost demand for the rupee and prop up its value—a standard crisis response for emerging-market central banks. Yet this time, the intervention proved ineffective. First, selling pressure was simply too great. Over just one month, foreign capital withdrew over $12 billion, and importers’ rigid dollar demand meant the RBI had to continuously inject dollars merely to hold the line. Second, a broad-based depreciation expectation had already taken hold, prompting speculative funds to build fresh short positions—betting on profits from the RBI’s own interventions. The result? India’s foreign reserves were depleted at an alarming pace. In just the first three weeks of March alone, over $30 billion was spent. That figure is staggering—India’s total foreign reserves stand at approximately $600 billion. At this rate of depletion, no central bank could sustain such continuous bloodletting.

India Central Bank Takes Steps to Support Rupee, Opens Dollar Window for Oil Companies

Oct 9, 2026

The Reserve Bank of India opened a special dollar window for three state-owned oil marketing companies to ease currency pressure. The central bank also tightened forex derivative limits to stabilize the rupee amid record lows.

reuters

2026-04-27

India’s Heat Wave Creates New Inflation Risks After Oil Surge

2026-05-04

Indian Rupee at Record Low as Analysts Dust Off 2013 RBI Playbook

2026-06-01

Indian Shares Likely to Open Lower as Iran War, Fund Outflows Weigh

2026-06-02

Fresh Gulf Hostilities Set to Weigh on Rupee, Traders Eye Central Bank Cushion

2026-06-04

Indian Rupee Rallies on RBI Measures to Support Oil-Hit Currency