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
