New Delhi: Why is the Indian rupee at record low today, and what's next amid Iran-US war
The Indian rupee plunged to an all-time low on Wednesday as escalating tensions in the Middle East sent crude oil prices soaring, sparking fears of higher inflation, a widening trade deficit and capital outflows from emerging markets.
The currency weakened past the psychologically important 92-per-dollar mark for the first time, falling as much as 0.8% to 92.30 against the US dollar. The drop eclipsed its previous record low of 91.9875 hit earlier this year.
The sharp decline came as global markets turned risk-averse amid the intensifying conflict involving the United States, Israel and Iran, which has raised fears of disruptions to energy supplies.
The biggest trigger for the rupee’s fall has been the surge in crude oil prices. Brent crude climbed above $82 per barrel after jumping nearly 12–13% in just two days – the steepest rise since 2020 – as traders worried about supply disruptions linked to the war.
For India, which imports more than 80% of its crude oil requirements, rising oil prices significantly increase the country’s import bill. This widens the current account deficit and puts pressure on the domestic currency.
Economists estimate that every $1 increase in crude oil prices raises India’s import bill by roughly ₹16,000 crore, making the rupee particularly sensitive to oil price shocks.
“Higher crude is a direct risk to rupee — we expect slightly heavier RBI intervention but if oil prices remain high, we may have to tolerate a weaker rupee,” Dhiraj Nim, forex strategist at Australia & New Zealand Banking Group Ltd told Bloomberg.
On Tuesday, the Indian government had warned that any major disruption in the Gulf region could have serious economic consequences for the country’s economy.
In a statement on Tuesday, the Ministry of External Affairs (MEA) said India was deeply concerned about the growing conflict triggered by US–Israel strikes on Iran and Tehran’s subsequent retaliation. The government stressed that the Gulf region is crucial for India’s trade routes, energy supplies and the livelihoods of millions of Indians working there.
“Any major disruption has serious consequences for the Indian economy,” the MEA said, noting that India’s trade and energy supply chains pass through the region.
The Reserve Bank of India is believed to have stepped in to support the currency after it breached the 92-per-dollar level, reportedly selling dollars in the market to slow the rupee’s fall.
However, analysts warn that sustained pressure from high oil prices could push the currency even weaker. Some forex strategists expect the rupee to test the 93-per-dollar level sooner than previously anticipated if geopolitical tensions persist.
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