Rupee Set to Open Weaker as Iran Strikes Revive Oil Risk

"The latest exchange of strikes has raised fresh doubts about the prospects for a lasting agreement, despite continuing diplomatic contacts," ANZ Bank said in a note.

For the rupee, the relationship with oil prices has been tight. A currency trader at a private-sector bank said market participants are watching how the Reserve Bank of India responds. Bankers said the RBI has been providing its usual support to the rupee, and the extent of intervention could become more pronounced due to the potential impact from rising oil prices. The private-sector bank trader added that he is monitoring the impact of oil-driven inflation concerns on U.S. Treasury yields.

Any sustained move above $80 a barrel would likely force the RBI to lean harder on the rupee, traders said. The central bank's intervention strategy has been incremental so far, the scale of oil-driven demand for dollars could test that approach in the coming sessions.

For traders tracking the crude oil profile, the jump in Brent adds a layer of cost pressure that India's import bill can ill afford.