The Indian rupee ended Wednesday virtually unchanged, stuck near a one-month low as rising oil prices and corporate dollar demand canceled out modest portfolio inflows. The currency closed at 96.2550 per dollar, barely moving from its previous session's close of 96.20. Main Developments After touching an intraday high of 96.06 on dollar sales from foreign banks acting for custodial clients, the rupee gave up gains as merchant demand for the greenback picked up. Asian currencies remained largely range-bound, while the dollar index held just below the 101 mark following softer-than-expected U.S. inflation data on Tuesday. Brent crude futures climbed 2% to $86.44 a barrel after the U.S. reimposed a naval blockade on Iranian ports. Iran's Islamic Revolutionary Guard Corps threatened to close “all other export corridors that benefit the U.S. and its allies,” escalating tensions in the region. Read also: Why India is doubling down on semiconductors with $13.3 billion Background Markets have scaled back expectations for U.S. Federal Reserve rate hikes after the inflation data, but sentiment remains fragile. ING noted in a research note that “investors will struggle to price in a benign inflation environment given developments in the energy sector, where both oil and natural gas are on the rise again, while refined products like diesel are surging as Ukraine intensifies its attack on Russian refineries.” Interest rate swap markets currently price in about 40 basis points of Fed rate hikes over the next 12 months and 65 basis points by the Reserve Bank of India. Both central banks are expected to hold rates steady at their upcoming meetings in late July and early August. Why It Matters India's consumer inflation rose above the 4% medium-term target for the first time in 17 months in June, according to data released earlier this week. This puts the Reserve Bank of India in a delicate position: it must balance rising prices against the drag from expensive oil imports, which could widen the trade deficit and pressure the rupee further. What's Next Escalation in U.S.-Iran hostilities poses the biggest near-term risk to the rupee. Any further rise in oil prices could accelerate inflation and force the RBI to reconsider its rate stance. Traders will also watch for any shift in Fed policy signals as markets remain vulnerable to a turnaround in risk sentiment.