The Indian rupee strengthened to a near three-week peak on Wednesday, supported by a rally in local stocks and traders trimming bearish positions ahead of the U.S. Federal Reserve's policy decision later in the day.Traders also said that state-run banks sold dollars in short-lived bursts, blunting ‌pressure from ⁠dollar demand ⁠related to the monthly futures expiry.The rupee closed at 95.6475 per dollar, up 0.2% from ​Wednesday's closing level. The currency touched a peak of 95.49 earlier in the session, ​its strongest level since July 10.Meanwhile, Brent crude jumped more than 3.5% to $87.1 per barrel, as Middle East tensions escalated following joint U.S.-Saudi strikes in Iraq and the interception of Iranian ballistic ⁠missiles aimed ‌at U.S. forces in the region.Brent has swung ​between $102 and $84 ​per barrel since Friday amid conflicting reports on the ⁠hostilities.Against this backdrop of global volatility, the Federal Reserve will announce its monetary policy decision later in the day. Markets are pricing in a roughly 30% chance of a 25-basis-point hike.Reflecting the uncertainty, near-term rupee volatility expectations rose, with the 1-month implied volatility gauge at 5.4%, near a two-week high."The (Fed) statement might acknowledge the upside risks to inflation posed by renewed geopolitical conflict, and there ‌will likely be at least one dissent in favor of a hike," analysts at Goldman Sachs said in a note. ​They expect ​the U.S. central bank to ⁠keep rates unchanged on Wednesday.Elsewhere, global shares struggled to push higher, as modest gains in Europe and the U.S. did little to calm investors ​after a punishing sell-off in Asia led by chipmakers.India's limited exposure to the AI theme, though, proved a silver lining, with India's benchmark stock gauge climbing 1.1%, led by an over 2% rise in IT stocks that had previously been battered by AI disruption concerns.