The Indian rupee fell to an all-time low on Tuesday, reaching 95.7375 per dollar amid diminishing hopes for a peace agreement between the U.S. and Iran, which triggered a surge in oil prices. This depreciation, driven by ongoing portfolio outflows and weakening market sentiment, eclipsed the previous low of 95.4325.
Traders indicated that likely intervention by the central bank helped mitigate further losses, with the currency closing the trading day at 95.6275, down 0.3% from the prior session. The rupee has emerged as the worst-performing major currency in Asia in 2026 thus far, having weakened nearly 5% since the onset of the Iran war on February 28.
The rupee, alongside other currencies from oil-importing nations, has faced substantial pressure following a near 50% increase in Brent crude prices since the conflict escalated. The Philippine peso and Indonesian rupiah have also suffered significantly, with the latter hitting a record low on the same day.
DBS noted that “defensive currencies, specifically the INR, IDR, and PHP, are currently trading with a heavy bias.” The bank highlighted that these regional currencies might find relief if oil prices consistently fall below $100, which would help alleviate imported inflation and improve current account forecasts.
Last week, ANZ revised its December outlook for the rupee to 97.5 from 93. BMI, a Fitch Ratings subsidiary, warned that the currency could plunge to 100 if the situation in Iran worsens.
With the U.S.-Israeli conflict against Iran continuing for about two-and-a-half months and remaining unresolved despite a fragile ceasefire since April 8, uncertainty persists. Former President Donald Trump described the ceasefire as “on life support,” emphasizing Iran’s rejection of a U.S. proposal and its insistence on conditions deemed unacceptable by the U.S. Brent crude futures last traded at $107.4, reflecting a 3% increase for the day.
Analysts caution that the longer the conflict endures, the more likely oil prices will remain elevated, sustaining pressure on the rupee. Higher oil prices are projected to exacerbate India’s current account deficit, particularly given the ongoing weak capital inflows.
Since the conflict began, foreign investors have withdrawn over $20 billion from Indian equities, with year-to-date outflows already surpassing last year’s record. Preliminary data indicated that overseas investors sold nearly $900 million in equities on Monday. India’s Nifty 50 benchmark equity index saw a decline of 1.8% on Tuesday, marking its most significant single-day drop in over a month.
Support for the Rupee
With the rupee facing persistent pressure, expectations have risen for potential intervention from policymakers, including reintroducing measures that were effective during the 2013 taper tantrum. Prime Minister Narendra Modi urged on Sunday for restrictions on fuel use, travel, and imports to conserve foreign exchange.
Policymakers may consider various strategies, such as discouraging non-essential imports like gold, implementing stricter rules on outward remittances, mobilizing foreign currency deposits, and even increasing domestic fuel prices. India has refrained from raising fuel prices despite the global rise following the escalation of the Iran conflict, diverging from many energy-importing emerging market nations.
Published on May 12, 2026
