India - Strait of Hormuz closure: Not just about oil prices for INR | MUFG

Michael Wan: We see the Indian Rupee as vulnerable and USD/INR likely rising above 95 levels if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed with Brent oil prices returning back to the US$100/bbl at the time of our writing: 

• While we do not yet know how the Iran and Middle East conflict will play out from here, it’s important to stress our current base case USD/INR forecast of 92.00 by Mar 2026 and 93.50 by Dec 2026 assumes a de-escalation after March 2026 and implicitly for oil prices to fall towards pre-Iran conflict levels over time.

• As a sensitivity analysis, we think that if oil prices are sustained at US$100/bbl, USD/INR could end the year at 95.50.

• In a left tail risk scenario if oil sustains at US$120/bbl coupled with meaningful energy shortages, we think USD/INR at 97.50 and even higher will look achievable.