Indian sovereign bond yields opened sharply higher on March 12 as global oil markets reacted to escalating geopolitical tensions in the Middle East. The benchmark 10 year government bond yield climbed to 6.68 percent, up about 5 basis points from the previous close of 6.63 percent, after crude oil prices surged beyond the psychologically significant $100 per barrel level.

The trigger came from renewed attacks on oil tankers near the Strait of Hormuz, a critical global energy transit route. Reports indicated that explosive laden boats linked to Iran struck two fuel tankers overnight, while at least three ships were targeted earlier near the same shipping corridor. The incidents have intensified fears that oil supply flows through one of the world’s busiest energy routes could face prolonged disruption.

Global oil benchmark Brent crude surged roughly 9 percent overnight, trading around $100.80 per barrel. Markets interpreted the attacks as a sign of rising geopolitical risk that could potentially restrict shipments through the Gulf region, which accounts for a substantial share of global crude exports.

Higher oil prices have immediate implications for India, one of the world’s largest crude importers. Rising crude typically widens the country’s current account deficit, fuels domestic inflation, and weakens the rupee. Reflecting those concerns, the Indian currency opened about 30 paise weaker, trading near ₹92.34 against the US dollar, compared with ₹92.04 in the previous session.

Bond markets reacted swiftly to the oil shock. When crude prices spike, investors often anticipate higher inflation and tighter financial conditions, pushing bond yields upward. Inflation expectations are particularly sensitive to oil in India because energy costs feed into transportation, manufacturing, and consumer prices across the economy.

The yield movement also comes after traders had seen some relief in the previous session, when yields cooled amid indications that the Reserve Bank of India may have intervened in the bond market. Such interventions are often used to stabilise yields when volatility rises or when borrowing costs threaten to climb too quickly.

Attention is now turning to the central bank’s scheduled liquidity operation. The RBI has announced a ₹50,000 crore open market operation bond purchase slated for March 13. The operation is designed to inject liquidity into the banking system by purchasing government securities from the market.

According to treasury market participants, such purchases help ensure that the financial system maintains adequate cash levels while also supporting orderly bond market functioning. By buying bonds, the RBI can moderate upward pressure on yields and help stabilise borrowing costs for the government.

At the same time, global oil supply agencies are attempting to calm markets.

The International Energy Agency said on March 11 that its 32 member countries would release 400 million barrels of crude oil from strategic reserves to counter supply disruptions and stabilise energy prices. However, traders remain cautious, as geopolitical developments in the Gulf region continue to dominate market sentiment.