At 9:40 a.m. IST, the rupee was trading at 92.62 per U.S. dollar, firming from Tuesday’s close of 93.0075. One-year dollar/rupee forward rates fell sharply, dropping 24 basis points to 3.08%, continuing a decline of nearly 90 basis points from Monday’s multi-year high. Meanwhile, one-week volatility expectations eased to around 8%, down from earlier spikes above 12%.
The ceasefire, which pauses hostilities for two weeks, triggered a nearly 14% drop in Brent crude oil prices. Israel endorsed the temporary halt to strikes on Iran, alleviating some of the geopolitical pressures that had recently roiled energy markets.
Investor confidence rebounded swiftly following the development. U.S. equity futures rose roughly 2.5%, while Indian equities surged by 3.6%, reflecting renewed appetite for risk assets after weeks of uncertainty over the conflict’s duration and its inflationary implications.
The agreement came just under two hours before the deadline set by former U.S. President Donald Trump, who had warned of potential strikes on Tehran’s civilian infrastructure if the Strait of Hormuz remained closed. In a note, MUFG Bank highlighted the broader regional significance, stating that “these negotiations and a pulling back from the brink is certainly a positive, including for Asia, which has been disproportionately affected by a potential Strait of Hormuz closure.”
The ceasefire coincides with heightened market attention ahead of the Reserve Bank of India’s monetary policy announcement at 10 a.m. IST. Analysts largely expect the central bank to maintain its current rate stance, though the recent volatility in oil prices has kept inflation concerns in focus.