Oil prices hit a four-year high on Thursday as fears of prolonged disruptions to global energy supplies intensified. The demonstration was sparked by comments from US President Donald Trump, who indicated that the naval blockade of the Strait of Hormuz would continue until Iran agreed to a new nuclear deal.
“We are negotiating with Iran. They have come a long way. The question is whether they will go far enough or not. There will never be a deal at this point unless they agree to no nuclear weapons,” Trump said, as quoted by the US State Department in a tweet.
Brent for the expiring June contract hit $126 a barrel on the intercontinental exchange, and the active July contract with the highest open interest was trading at $114.07 a barrel at the time of writing, down 3.07% from its previous close.
High oil prices pose a threat to global economic stability, especially for large importers such as India. As India relies on imports for 90% of its oil, persistently high prices are expected to widen the current account deficit and weaken its currency. India’s oil import bill was close to $122 billion in fiscal year 2026 (FY26) and every one dollar increase in oil price adds approx. ₹16,000 crore on import costs.
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The Trump administration is talking to oil companies and considering measures to increase U.S. production “really soon” to ease the impact of the Iran war on energy supplies, White House economic adviser Kevin Hassett said later in the day.
“We’ve been in constant communication with the oil companies and we’ve been looking at actions that we could take here in the U.S. to really increase production in the U.S. very soon,” Hassett told reporters at the White House.
“There are things, regulations that are being held, like how quickly things could be enforced … and we’re studying them, how we can change them, and we’ve talked to the oil companies about that,” he added.
“Inevitable” price increase
While keeping retail fuel prices unchanged at high oil prices, state-owned oil marketing companies will suffer a loss of revenue or a lack of return of approx. ₹20 per liter when selling gasoline and the surrounding area ₹100 per liter when selling diesel. On Wednesday, the Ministry of Economic Affairs noted in its monthly economic overview for April that while some countries have yet to pass on the cost increase to consumers, such a move is “inevitable”.
Prashant Vasisht, senior vice president and joint group head, Icra Ltd said, “With oil prices at $120-125 per barrel and long-term averages for crack spreads, marketing margins for petrol and diesel are estimated to be negative. ₹14 liters and ₹18 liters, or
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During the day, the Nifty was down 0.3% at 23,997.55, while the Sensex was down 0.8% at 76,913.5. The rupee closed at 94.92 against the dollar after touching an intraday low of 95.33.
“The rupee initially reacted to the oil opening much higher and then moved further to $126, along with the US Fed being quite hawkish. This gave some natural strength to the dollar, causing the rupee to weaken initially,” said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
“Towards the end it came down a bit, maybe because of the interventions or because oil started to go down,” he said, adding that overall the move was in line with other markets, whether it was equities or bonds, it was a reaction to risk reduction across markets.
Pawar expects some gradual depreciation, with occasional dips. He said there are not too many trading positions due to interbank restrictions; so most of the movement is driven by actual client demand.
“If there is a lot of buying pressure on the dollar, you could see the rupee weaken further. The move may be slower but more secular. It’s difficult to set a range in this volatility,” Pawar added.
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The rise in oil further sent the 10-year bond yield up 0.02% to 7.01% on expectations of potential fiscal slippage as the government subsidizes fuel and fertilizers.
“This is likely to mean more borrowing by the government, which will be reflected in rising bond yields,” said Madan Sabnavis, chief economist at Bank of Baroda.
Also, while selling dollars to cushion the fall in the rupee could create a liquidity deficit, the RBI is expected to address the issue through open market operations, Sabnavis said.
