Indian Rupee Hits New Low as Oil Tops $103 on Hormuz Crisis

The Indian rupee tumbled to a record low against the US dollar after Brent crude oil surged past $103 a barrel on fears that escalating conflict in the Strait of Hormuz could lead to a prolonged disruption of global energy supplies.

"If the closure of the Strait continues, it will push a further 45 million people into acute hunger," the United Nations World Food Programme stated, highlighting the severe humanitarian risk.

Brent crude futures rose nearly 2 percent to $103.68, while West Texas Intermediate advanced to $94.51. The gains came despite a ceasefire extension between the US and Iran, as both sides continued to restrict transit through the waterway that handles about 20 percent of daily global oil supplies. In India, benchmark stock indices fell by around 1 percent in response to the oil price shock, according to market data.

The crisis poses a severe threat to the global economy, particularly for energy-importing developing nations already struggling with high debt. A sustained closure could trigger a wave of inflation, currency depreciation, and social unrest, echoing the 2008 food crisis that toppled governments in Haiti and Madagascar.

Fertilizer Shockwave Hits Global South

The conflict's impact extends beyond fuel, creating a fertilizer shock that threatens to ignite a slow-burning food inflation crisis. The Persian Gulf states are central to producing key fertilizer ingredients like ammonia and urea. With the Strait of Hormuz blockaded, countries that import both fuel and fertilizers are hit twice.

Sri Lanka, which imports 60 percent of its fuel and relies on fertilizers from China that require components from the Middle East, expects food prices to rise by 15 percent. In Bangladesh, the government has already shut four of its five state-run fertilizer factories to conserve energy, while diesel shortages affect crop irrigation.

Debt and Austerity Compound Crisis

The energy crisis is colliding with a pre-existing debt crisis, crippling the ability of many nations to absorb the shock. Some 3.4 billion people live in countries where governments spend more on debt interest payments than on health or education, according to UN data.

This debt distress limits the capacity for fuel subsidies. Egypt, one of the world's most indebted countries to the IMF, responded by raising fuel prices by up to 30 percent and forcing businesses to close early to save power. In Zambia, the government announced a three-month suspension of fuel taxes, a move that will cost $200 million in lost revenue. Indonesia is reducing its free school meals program and capping fuel subsidies at 50 liters per vehicle per month, measures that will disproportionately affect its poorest citizens.

This article is for informational purposes only and does not constitute investment advice.