Geopolitical instability triggered by the U.S. strike on Iran’s nuclear site has put pressure on India’s economy—Oil prices spiked nearly 4%, driving down the rupee to 86.59 per USD and squeezing bond yields—Indian 10-year government bond yields hovered around 6.31%. Rising crude import costs may widen the current account deficit and fuel inflation. Markets are closely watching whether the RBI will step in to curb volatility as it maintains a “neutral” stance following a 50 bps repo rate cut earlier this month.
Despite pressures, India benefits from resilient macro indicators: stable inflation and manageable real yields. However, if Middle East conflict escalates and pushes Brent above $80, it could trigger a sharper rupee decline toward INR 87.50, prompting RBI action. The central bank’s next moves and global economic signals—especially U.S. inflation data and Fed remarks—will be crucial in shaping market sentiment.
