Indian rupee options trading has surged since ​the Iran war began, reflecting heightened speculative and hedging ⁠activity, with flows skewed toward short-term bets on rupee weakness – signalling the Asian currency will stay under pressure.

The surge in activity and the tilt toward short-term bearish bets ‌on the rupee underscore how the Iran war-driven jump in crude has jolted markets and reshaped positioning in the currency market.

In ‌the first two weeks of March, the notional value ‌of dollar-rupee ⁠options traded in the U.S. was about $18.5 billion, nearing the ⁠roughly $24-$25 billion seen in each of the previous three months, per data from LSEG.

Volumes, adjusted for the shorter period, are nearly double, pointing to a post-war surge following ​the start of the Iran ‌war on February 28.

India is extremely sensitive to oil price swings since it imports over 80% of its energy needs, while the Middle East conflict also threatens to curb remittances and hurt exports.

Sustained ‌high oil prices will worsen the outlook for Asia’s third-largest economy, ​widen the current account deficit and fuel inflation, leaving the rupee more exposed than many of its peers.

Brent crude ⁠has surged more than 40% since the war began, while the rupee has weakened 1.6% to hover near its lifetime low of 92.4550 per ‌dollar. The decline would likely have been deeper without active central bank intervention.

Vulnerable rupee

Firms trading over-the-counter derivatives in the U.S. report transaction details to registered swap data repositories, offering a window into market positioning and flows.

Data shows dollar/rupee call volumes are outpacing puts, indicating the market is positioning for further weakness in the Indian currency.

Call strikes on dollar/rupee ‌options are clustered around current spot levels and slightly higher, signalling expectations of incremental ​upside in the pair rather than sharp moves.

The bulk of activity has been in short-dated tenors, suggesting positioning to ⁠profit from near-term volatility linked to the war.

“Last week was more about positioning ⁠for an escalation in the conflict, which put pressure on oil-importing currencies, and this week is more of the same,” ‌a Singapore-based portfolio manager at a hedge fund said, requesting anonymity since he is not authorised to speak to the media.

“Funds are ​trading the winners and losers from higher energy prices.”

Published on March 17, 2026

Equity benchmarks recovered from the morning’s early losses and turned positive by midday on Tuesday, but gains remained capped as persistent weakness in information technology stocks and elevated crude oil prices continued to weigh on broader market sentiment heading into the afternoon session.

The BSE Sensex, which had opened at 75,826.68 against Monday’s close of 75,502.85, was trading at 75,795.82 by 12.50 pm, up 292.97 points or 0.39 per cent. The NSE Nifty50 was at 23,477.25, gaining 68.45 points or 0.29 per cent from its previous close of 23,408.80. The recovery from the morning lows, when the Nifty had slipped below its opening levels near 23,371, reflects selective buying interest in auto, telecom, and financial stocks.

On the Nifty50, CA Eternal, the parent company of Zomato, was the top gainer, surging 4.87 per cent to ₹232.85. Tata Steel rose 2.31 per cent to ₹191.25, while Mahindra and Mahindra advanced 2.25 per cent to ₹3,104.50. HDFC Life gained 2.07 per cent to ₹638.95, and Bharti Airtel added 1.68 per cent to ₹1,818.80.

On the losing side, Wipro remained the biggest drag, falling 2.23 per cent to ₹190.75. Bajaj Finance declined 1.60 per cent to ₹864.10, Cipla shed 1.58 per cent to ₹1,279.50, Adani Ports lost 1.30 per cent to ₹1,356.00, and State Bank of India slipped 1.29 per cent to ₹1,052.90.

Market breadth on the BSE was moderately positive. Of 4,211 stocks traded, 2,206 advanced and 1,831 declined, with 174 remaining unchanged. Forty-eight stocks hit 52-week highs while 326 touched 52-week lows, indicating continued stress in the broader market despite benchmark-level recovery. The number of stocks in lower circuits stood at 156 against 126 in upper circuits.

The IT sector’s continued underperformance remained a structural concern. Ponmudi R, CEO of Enrich Money, noted the sector was down around 2 per cent and acting as a drag on overall market momentum, limiting broader participation despite value buying in the auto segment. He observed that the near-term direction remains event-driven, closely tied to crude oil price movements, geopolitical developments, and institutional fund flows, factors that are likely to keep volatility elevated.

On the technical front, Nifty opened with an exhaustion gap-up near the 23,460 zone but failed to sustain those levels in early trade before recovering. Immediate support is placed around 23,200 to 23,100, with a stronger base at 22,950. Resistance at 23,500 remains critical; a decisive breakout above that level is needed to trigger fresh buying momentum toward the 23,800 to 24,000 range.

Crude oil remained a persistent risk factor. MCX April crude oil futures were trading above ₹8,800 after correcting from multi-year highs near ₹10,549, with the broader structure holding above key moving averages. The USD/INR pair was trading near the 92.10 to 92.50 range, with elevated crude prices and safe-haven demand for the dollar keeping the rupee under pressure.

Gold markets also remained active. COMEX Gold was consolidating within the $4,990 to $5,040 support band following recent record highs, while MCX Gold futures hovered around ₹1,56,500 to ₹1,57,500 in a phase of mild profit booking. MCX Silver futures were trading above the ₹2,58,000 to ₹2,62,000 range with the broader structure remaining bullish despite short-term volatility.

Institutional flows continue to set the tone. Foreign institutional investors were net sellers to the tune of ₹9,365.5 crore in the previous session, while domestic institutional investors countered with net purchases of ₹12,593.4 crore, cushioning the downside. India VIX remained elevated near 21.6, keeping option premiums expensive with the weekly derivatives expiry also due today, adding to intraday caution among traders.

Published on March 17, 2026

The body that advises the world’s central banks has urged policymakers not to rush reactions to the Iran ‌crisis-driven spike in global energy prices, calling it a textbook case of when to “look ​through” a supply shock, if it proves temporary.

This month’s 40 per cent surge in oil prices ⁠and near 60 per cent leap in wholesale gas prices have evoked comparisons to 2022, when Russia’s invasion of Ukraine and the post-COVID reopening of the global economy sent inflation rates soaring.

Leading central banks including the U.S. Federal Reserve and European Central Bank ‌raised interest rates to their highest levels in decades, but were criticised for reacting too slowly after mistakenly judging the impact would be transitory.

This time, financial markets have been quick ‌to reprice expectations, betting central bankers won’t want to make the same mistake again, although the Bank ‌for ⁠International Settlements (BIS) used its latest report to urge caution.

“If it’s a supply shock, and certainly ⁠if it’s a temporary
one, these are the textbook examples where you should look
through and not react with monetary policy,” the central bank
umbrella group’s top economic advisor, Hyun Song Shin, said.

“It really depends on how long the conflict lasts and how
long ​the rise in the oil price will ‌be sustained.”

The comments come at the start of a crucial week for markets
with the Federal Reserve, European Central Bank, Bank of England
and Bank of Japan all holding their first meetings since the
Middle East crisis erupted on February 28.

Shin added the rapid shift in market interest rate pricing
was ‌perhaps a “sign of the times” given the still-raw memories
of 2022.

Money markets have already halved ​the number of Fed rate cuts
they expect this year to one and are now fully pricing in an ECB
hike by July, along with an 85 per cent chance of ⁠a
second increase by year-end.

“It’s a kind of a knee-jerk reaction,” said Shin,
highlighting too that key inflation gauges hadn’t yet moved to
the same extent, making it “a very confusing picture” overall.

Longer war, larger impact

A prolonged conflict, ‌or one that spirals wider, would
threaten a further rise in interest rates that could amplify the
economic damage, hit “rich” asset prices and compound the
worries about ballooning government debt levels.

“That is something which is going to be a very important
topic for us to keep under review,” Shin said.

“The impact of a sustained rise in energy prices will have
an effect on the real economy and the longer it lasts, of
course, the larger that impact. And there will also be an impact
on fiscal balances if the economy ‌sees a downturn.”

The BIS’ report, which it publishes four times a year, also
included a number of studies, including one ​on how central banks
have changed the way they communicate with markets and the
public following the various recent global crises.

It showed more are now using scenarios to illustrate the
implications ⁠of specific risks, in addition to traditional tools
such as fan charts and qualitative risk discussions.

Many have also ⁠tried to shift away from so-called forward
guidance on where rates are likely to go and instead publishing
their own rate projections, often in the context of alternative
scenarios.

The BIS’ view of ‌the current market risks also touched on other
bouts of volatility seen this year, including some sharp
selloffs in artificial intelligence-linked stocks and some
troubles in the private credit market.

“We have to watch this,” ​Frank Smets, the deputy head of the
BIS’ monetary and economic department, said. “But we don’t see
any major disruptions at this point.”

Published on March 17, 2026