The Indian rupee slumped to a record low of 95.73 against the US dollar on Tuesday, as escalating tensions in West Asia and a sharp rebound in crude oil prices rattled currency markets and weakened investor sentiment.
The domestic currency opened at 95.50, already breaching its previous all-time low of 95.43 recorded last week, before slipping further in intraday trade. The latest fall takes the rupee’s depreciation to over 5 per cent since the onset of the ongoing US–Israel versus Iran conflict, now in its eleventh week.
Market sentiment deteriorated after Donald Trump described the Iran ceasefire as being on “massive life support”, raising concerns over a prolonged conflict. The remarks dampened hopes of a near-term resolution, triggering volatility across global markets, including currencies and commodities.
Crude oil prices surged in response, with Brent crude rising above $105 per barrel, reversing recent declines. Elevated oil prices remain a key pressure point for the rupee, as India imports over 80 per cent of its crude requirements. Higher oil costs widen the import bill, increase demand for dollars and exert downward pressure on the domestic currency.
Analysts say the rupee has also been weighed down by broader macroeconomic concerns, including the risk of a sustained balance of payments deficit. The currency has depreciated around 6.5 per cent so far this year, making it the worst-performing currency in Asia.
The geopolitical standoff has further intensified after Iran rejected a US-backed ceasefire proposal, with Tehran signalling readiness to respond to any escalation. The uncertainty has raised fears of potential disruptions in key shipping routes such as the Strait of Hormuz, a critical artery for global oil supplies.
Domestically, concerns over rising import costs and external imbalances have been reinforced by recent policy signals. Narendra Modi recently urged citizens to conserve fuel and foreign exchange, encouraging reduced consumption of petrol and diesel, greater use of public transport and postponement of non-essential foreign travel.
Market participants interpreted the appeal as an indication of mounting pressure on India’s trade balance, particularly if crude prices remain elevated for an extended period. Economists have already begun revising growth forecasts downward while raising inflation projections and adjusting currency outlooks.
According to analysts, three key factors are currently driving the rupee’s decline: persistent geopolitical tensions in West Asia, the likelihood of prolonged high crude oil prices and uncertainty around global central bank policies. Investors are also closely monitoring signals from the US Federal Reserve, where leadership transition expectations have added to market caution.
Going ahead, currency markets are expected to remain sensitive to geopolitical developments, global oil price movements and upcoming inflation data from both India and the United States. |
