Summary of this article
Brent crude crosses $110 as the West Asia conflict threatens oil supplies
Higher crude prices and a weaker rupee could fuel India's inflation
Indian stocks face pressure as oil costs rise and margins tighten
Brent crude touched $110 a barrel in early trade on September 11, 2026, before easing later in the day, as the war in West Asia moved into a more dangerous phase and traders scrambled to reprice the risk of a prolonged supply shock.
By mid-morning, the benchmark had settled closer to $105, down by about 2.30 per cent on the day and building on the previous session's jump of more than 6 per cent. US West Texas Intermediate (WTI) also trades above $100 a barrel. Both contracts are now up close to 13 per cent for the week, their sharpest weekly gain since mid-July, and are on course to close above $100 a barrel for the first time since May.
In domestic markets, the September crude on the Multi-Commodity Exchange (MCX) rose up to Rs 9,897 per barrel, up more than 1.80 per cent from the previous close. The rupee, already under strain, slid to around 95.75 to the dollar, a fall of about 1.5 per cent over the week, and a sharp reversal from the 94.43 level it had touched only recently.
A War That Keeps Widening
The immediate trigger was Yemen. Houthi forces seized the Red Sea port city of Mocha on September 10 and pushed further down the coast toward the Hanish islands, tightening their hold over the Bab el-Mandeb Strait, one of the arteries through which a large share of the world's seaborne oil moves. Traffic through the Strait of Hormuz, the other chokepoint at the heart of this conflict, is also heavily restricted, and tanker attacks in the wider Gulf have picked up rather than faded.
The fighting has also spread beyond its original front. Strikes on Saudi energy infrastructure have expanded the conflict beyond Iran and the Strait of Hormuz. Tehran and Washington have also exchanged direct attacks at sea. Iran said it struck 10 ships near the strait on September 9 after the US attacked five Iranian oil tankers. Iran’s Revolutionary Guard has also warned of a stronger response if the conflict escalates further.
US President Donald Trump raised the stakes again by warning that the US could strike Iran’s Pickaxe Mountain site near the damaged Natanz nuclear facility. He also suggested that the war could continue until after the November midterm elections.
The Supply Cushion Is Thinning
According to OPEC’s monthly oil market report, Saudi Arabia reported August oil production of 6.24 million barrels a day to OPEC, but supplied 7.12 million barrels a day to the market. This suggests the kingdom used oil from its stocks instead of increasing production to meet demand. Iraq, meanwhile, increased its output by 664,000 barrels a day to 3.38 million barrels a day in August, OPEC data showed.
Demand is also picking up. According to reports, Chinese refiners have increased activity after a weak July. Independent refineries were running at nearly 63 per cent of capacity, up from around 45 per cent two months earlier, according to data from JLC Network Technology, a China-focused energy information provider.
According to the US Energy Information Administration (EIA), commercial crude oil inventories in the US fell by 0.4 million barrels to 424.1 million barrels in the week ended September 4.
Gasoline inventories, however, rose by 1.3 million barrels, although they remained about 5 per cent below the five-year average. Distillate stocks, which include diesel, increased by 2.1 million barrels and were 13 per cent below the five-year average.
Fuel demand, though, remained weak. Over the past four weeks, total petroleum products supplied averaged 20.1 million barrels a day, down 3.7 per cent from a year earlier. Gasoline demand fell 1.4 per cent to 8.8 million barrels a day, while distillate demand declined 2.6 per cent to 3.7 million barrels a day. Jet fuel demand was down 2.3 per cent, EIA data showed.
Where This Leaves Indian Markets
For India, the impact of higher crude oil prices is coming from two sides. Expensive oil and a weaker rupee are both adding to the pressure.
India imports roughly four out of every five barrels of oil it consumes. So, elevated crude oil prices can affect the margins of oil marketing companies, followed by higher transport and input costs for businesses. If the government allows retail fuel prices to rise, consumers could also feel the impact at the pump.
Aamir Makda, commodity and currency analyst at Choice Broking, said, "Rising international oil prices force domestic refiners to increase their foreign currency reserves. The Indian rupee's depreciation against the dollar drives up costs, resulting in higher rupee-denominated crude oil prices.”
"This imported energy inflation affects retail prices for fuels such as gasoline and diesel, which raises logistics costs across the country, resulting in a second wave of cost-push inflation that raises transportation expenses for essential goods," Makda added.
"Markets may have already priced in some supply disruption, but a prolonged West Asia crisis could trigger further risk-off moves," said Ruchit Thakur, market analyst at VT Markets.
The weaker rupee is making the situation worse. Crude oil is bought and paid for in dollars. At Rs 95.75 to the dollar, compared with Rs 94.43 last week, the same barrel of crude costs Indian buyers more in rupee terms. Higher crude prices also increase India's import bill and demand for dollars, which can put further pressure on the rupee. A weaker rupee then makes the next crude shipment even more expensive. This can widen the trade deficit, put pressure on the current account and add to imported inflation, which the Reserve Bank of India (RBI) closely monitors.
Makda said, "The combined pressure of a depreciating domestic currency and rising global crude oil prices creates a powerful economic mechanism known as imported inflation, which has a significant impact on India's macroeconomic stability."
"Because international crude oil benchmarks are only denominated in US dollars, the Indian economy is particularly vulnerable to both energy market volatility and foreign exchange fluctuations," he said. With Brent crude oil trading above $105 per barrel and the USD/INR exchange rate at 95.75 per dollar, Makda thinks energy imports will “become more expensive,” leading to domestic “price pressures” across supply chains.
Geojit Investments' VK Vijayakumar said crude has "turned excessively volatile.” His reading is that oil near $100 is manageable for India's growth and corporate earnings, but a sustained move to $110 and beyond would not be. With the currency already stretched, he expects the central bank to come under pressure to raise rates rather than hold.
Thakur said, "If supply disruptions intensify, Brent could potentially test $110 - 120 per barrel in the near term, with sharper spikes possible if major shipping routes are affected. However, sustained prices above $118 - $120 would likely require a significant and prolonged supply shock."
Oil marketing companies and rate-sensitive sectors such as autos and paints could face pressure from weaker margins and higher borrowing costs. Upstream oil producers, on the other hand, could benefit from higher realisations.
Until there is greater clarity on the Strait of Hormuz and Red Sea disruptions and the US stance on Natanz, market volatility is likely to remain sensitive. With the rupee also under pressure, currency movements could have as much influence on sentiment as crude prices.
