Crude Oil Surge Triggers Inflation Fears, Rate Hike Risks & Rupee Fall

RISING CRUDE RAISES INFLATION AND RATE RISKS

The week was dominated by the Brent Crude story as prices touched a high of $119/bbl, and settled around $112/bbl for the week. It was essentially a supply scare. Israel bombed the critical South Pars gas fields in Iran. In response, Iran bombed Qatar’s Ras Laffan Industrial, one of the biggest oil processing complexes in Qatar. Nearly 17% of Qatar’s LNG producing abilities have been eroded. Iran also hit Saudi Arabia’s Red Sea facilities.

For the first time, the spillover effects of oil are being seen on other asset classes. For instance, bond yields have inched up on expectations that central banks would be forced to raise interest rates in tandem with rising inflation. Also, the higher interest rate assumption led to a sharp crash in gold and silver during the week. The concerns are that; higher interest rates would increase the opportunity cost of holding gold and silver.

US BOND YIELDS MOVE UP SHARPLY BY 11 BPS ON FRIDAY

Data Source: Bloomberg

Key takeaways on US bond yields data:

1. The week saw US bond yields rise from 4.285% to 4.392%; up 26 bps in 2 weeks
2. This is on the back of higher inflation assumptions amid the trade disruption
3. With the Fed holding rates this week, the vote is shifting increasingly hawkish

For the week; US 10-year bond yields scaled a high of 4.393% and a low of 4.169%.

US DOLLAR INDEX (DXY) HOVERS AROUND THE 100-LEVEL

Data Source: Bloomberg

Key takeaways on US Dollar Index data:

1. DXY closed just below 100, after breaching the level last week after 4 months gap
2. While rate hikes are being built in, GDP growth could put a limit on the dollar index
3. The massive debt pile of $39 trillion remains an overhang for the dollar index

For the week, US dollar index (DXY) touched a high of 100.48 and a low of 98.97.

INDIA BOND YIELDS INCH UP FOR THE WEEK

Data Source: RBI

Key takeaways on India Bond Yields data:

1. Inflation fears pushed up Indian bond yields by 7 bps to 6.737% for the weeK.
2. RBI MPC is expected to hold status quo on rates till the inflation risk subsides
3. The full impact of imported inflation is still not too clear for the Indian economy

For the week, India Bond Yields touched a high of 6.773% and a low of 6.679%.

RUPEE (USDINR) ALMOST HITS THE PANIC BUTTON

Data Source: RBI

Key takeaways on USDINR data:

1. The Indian rupee fell sharply ₹92.540/$ to ₹93.692/$ for the weeek.
2. FPI selling in Indian equities has been $9.5 billion in March 2026, so far
3. The rising prices of crude oil is also putting pressure on the Indian rupee
4. RBI intervention has been limited, despite its $100 billion net short on dollar

For the week, the USDINR touched a high of ₹92.147/$ and low of ₹93.826/$.

CRUDE OIL – SUPPLY SCARE RESULTS IN 10% WEEKLY SPIKE

Data Source: Bloomberg

Key takeaways on Brent Crude Prices:

1. Brent Crude closed the week higher; from $103.14/bbl to $112.19/bbl
2. Crude oil is up 57% in the last 1 month and 89% in the last 70 days
3. With massive production cuts in Middle East, $150/bbl looks the next target

For the volatile week, Brent Crude touched a high of $119.13/bbl and a low of $99.54/bbl.

SPOT GOLD CORRECTS BY -10.5% FOR THE WEEK

Data Source: Bloomberg

Key takeaways on spot gold (XAU) price data:

1. Spot gold crashed in the week from $5,019.25/oz to $4,491.15/oz
2. Rising bond yields raises question about opportunity cost of holding gold
3. Gold is now down more than 20% from its late January peak of $5,595/oz
4. Safe haven demand for gold has taken a back seat after the war started

For the week, spot gold touched a high of $5,044.84/oz and low of $4,477.82/oz.

SPOT SILVER CRACKS -16% DURING THE WEEK

Data Source: Bloomberg

Key takeaways on spot silver (XAG) prices:

1. The week saw silver cracking from $80.5764/oz to $67.7881/oz
2. The weakness was largely triggered by a more than hawkish stance by the Fed
3. Spot Silver has now corrected -44.3% from its late January peak of $121.67/oz

The Gold-Silver Ratio of 66.25X has lost relevance amid the macroeconomic chaos.

For the week, spot silver touched a high of $82.55/oz and low of $65.51/oz.