The Indian rupee reached an all-time low on Tuesday as waning hopes for a peace agreement between the United States and Iran led to a surge in oil prices. This situation, exacerbated by ongoing portfolio outflows and a decline in market sentiment, placed additional pressure on the currency.
The rupee fell to 95.7375 per dollar, surpassing its previous low of 95.4325. Traders noted that likely intervention from the central bank helped mitigate further losses, with the currency ending the trading session at 95.6275, reflecting a 0.3% decline from its prior closing value.
So far in 2026, the rupee has emerged as Asia’s worst-performing major currency, having weakened nearly 5% since the outbreak of the Iran conflict on February 28. The rupee, along with other currencies of oil-importing nations, has been particularly affected due to a nearly 50% increase in Brent crude prices since the conflict began. Both the Philippine peso and the Indonesian rupiah have also faced significant declines, with the latter hitting a record low on the same day.
DBS noted in a report, “Defensive currencies, specifically the INR, IDR, and PHP, are currently trading with a heavy bias. These regional pairs will be looking for relief in the form of oil prices declining sustainably below $100 to ease imported inflationary pressures and improve current account outlooks.”
In a recent forecast, ANZ revised its December target for the rupee from 93 to 97.5, while BMI, a unit of Fitch Ratings, has warned that the currency could slide to 100 if the situation in Iran worsens. The U.S.-Israeli conflict with Iran has been ongoing for approximately two-and-a-half months, showing few signs of resolution, despite a fragile ceasefire that has been in place since April 8.
Former U.S. President Donald Trump indicated that the ceasefire with Iran was “on life support,” as Tehran rejected a U.S. proposal to resolve the conflict and maintained a list of demands deemed unacceptable by the U.S. Brent crude oil futures recently traded at $107.4, marking a 3% increase for the day.
Analysts have suggested that as the conflict continues, the likelihood of elevated oil prices persists, which will continue to place pressure on the rupee. Rising oil prices could exacerbate India’s current account deficit, especially in light of anticipated weak capital inflows. Since the conflict began, foreign investors have withdrawn over $20 billion from Indian equities, surpassing last year’s record withdrawal levels. Preliminary data showed that overseas investors sold nearly $900 million on Monday alone.
India’s benchmark equity index, the Nifty 50, fell by 1.8% on Tuesday, marking its most significant single-day decline in over a month.
With the rupee facing ongoing pressure, anticipation is growing that policymakers may intervene to support the currency, potentially reviving measures utilized during the 2013 taper tantrum. On Sunday, Prime Minister Narendra Modi urged for restrictions on fuel use, travel, and imports to conserve foreign exchange.
Policymakers may consider a range of actions, such as disincentivizing non-essential imports like gold, imposing stricter rules on remittances, introducing a scheme to mobilize foreign currency deposits, and increasing domestic fuel prices, according to Nomura. Notably, India has not raised fuel prices despite the upward trend in global prices since the Iran war began, contrasting with many other energy-importing emerging markets.
Published on May 12, 2026.
