What’s the story
The Indian rupee has hit a new all-time low of 95.79 against the US dollar, as hopes for a peace deal between the United States and Iran fade.
The ongoing conflict has led to a spike in oil prices, which along with continued portfolio outflows and weakening sentiment, have put pressure on the currency.
Rupee’s fall surpasses previous record low
The rupee’s fall surpasses its previous record low of 95.73 hit on Tuesday. However, likely intervention by the central bank has limited further losses, traders said.
The rupee remains Asia’s worst-performing major currency for 2026 so far and has fallen nearly 5% since the Iran war broke out on February 28.
Oil price surge impacts currencies of oil-importing countries
The rupee and other currencies of oil-importing countries have been severely impacted by a nearly 50% surge in Brent crude prices since the Iran war began.
The Philippine peso and Indonesian rupiah have also been hit hard, with the latter hitting a record low on Tuesday.
“Defensive currencies, specifically the INR, IDR, and PHP, are currently trading with a heavy bias,” DBS said in a note.
Analysts warn of further rupee decline
Last week, ANZ revised its December target for the rupee to 97.5 from 93.
BMI, a Fitch Ratings unit, warned of a potential fall to 100 if the Iran war escalates.
The US-Israeli conflict with Iran has been ongoing for about two-and-a-half months now, showing no signs of resolution despite a fragile ceasefire in place since April 8.
Conflict’s impact on Indian economy and capital inflows
The longer the conflict continues, the more likely it is that oil prices will remain high, keeping the rupee under sustained pressure.
Higher oil prices are expected to widen India’s current account deficit, with the strain worsened by weak capital inflows.
Foreign investors have withdrawn over $20 billion from Indian equities since the war began, with year-to-date outflows exceeding last year’s record.
