Brent crude traded close to $96 a barrel on Thursday, September 3, having settled just below that level a day earlier after briefly touching $97 during the height of the fighting, while WTI held near $91, up roughly 9% over the past three trading sessions.
The latest round of hostilities began when US Central Command carried out strikes against Iran’s air-defence, radar, maritime and mine-laying capabilities, and Iran’s Revolutionary Guard retaliated by targeting US-linked positions across the Gulf. Iran also said an American strike hit a wedding celebration near the Strait of Hormuz, killing several people, an incident Tehran’s foreign ministry called “brutal” and cited as justification for widening its retaliation.
Hormuz Remains the Trigger
The central worry for traders isn’t the exchange of fire itself but what it signals for tanker traffic through the Strait of Hormuz, the narrow waterway between Iran and Oman through which close to a fifth of the world’s oil typically moves. There’s no easy substitute route for that volume of crude, which is why even the threat of disruption tends to move prices more than any actual change in supply. Kpler data showed just four commodity vessels transiting the strait on Tuesday, down sharply from ten the previous session, even though flows had briefly touched a wartime record of over 17 million barrels a day earlier this week before the fighting resumed.
Thursday’s escalation added Kuwait to the list of targets, with its military reporting it was intercepting missile and drone attacks and its foreign ministry calling the strikes a “grave breach” of international law. That widening of the conflict beyond Iran’s immediate neighbourhood to Kuwait, Bahrain, Jordan and Iraq’s Kurdistan region in the space of a single week is what’s keeping the risk premium elevated even as US officials insist the campaign won’t drag on much longer.
Why It Matters for India
For India, which imports the large majority of its crude requirement, a sustained move higher in Brent creates a direct and immediate currency risk. Higher international prices mean a bigger import bill and greater dollar demand from refiners, which puts added pressure on the rupee, and the rupee has already been trading under strain from elevated Brent levels through much of this year’s conflict. That pressure compounds itself: higher crude raises India’s dollar demand, a weaker rupee makes that same crude even costlier in rupee terms, and the combination eventually filters through into fuel, transport and input costs.
The impact isn’t uniform across sectors, though. Oil marketing companies and other downstream users that buy crude as a raw material tend to see margins compressed when input costs rise faster than retail prices can adjust, while upstream producers benefit from higher realisations on the crude they extract and sell a distinction worth keeping in mind before assuming higher oil is uniformly bad news for Indian equities.
What To Watch
President Trump said Wednesday he didn’t expect the renewed strikes to continue “too long,” even while confirming the US remains “prepared to do another one any time we want,” and that mixed signalling is likely to keep markets guessing in the sessions ahead.
If this week’s escalation proves to be a contained flare-up, some of the fresh risk premium could unwind quickly as Hormuz traffic shows signs of stabilising again. But a broader widening of the conflict, especially strikes that further disrupt tanker movement or draw in more Gulf states, could keep Brent pinned well above $95 regardless of what underlying supply-demand fundamentals suggest.
The key pairing to track remains Brent crude alongside USD/INR. A sustained push toward or beyond $96-97, combined with a weaker rupee, would tighten the screws on India’s import bill and could turn into a broader inflation and earnings concern as the current quarter progresses particularly if Hormuz flows, which the EIA had pegged at just 4.9 million barrels a day in Q2 2026 against a pre-war average above 20 million, struggle to recover meaningfully from here.