The Indian rupee has been caught in a freefall with no bottom in sight yet, as the global macro uncertainties and higher crude oil prices triggered by the US-Iran war continue to create challenges for India.
On Tuesday, the rupee touched a record low of 96.6150 against the US dollar. So far this year, the domestic unit has already lost 7% with the selloff gathering pace since March, which coincided with the West Asia crisis and crude oil shock.
Brent crude oil prices have remained over $100 per barrel for almost three months now. This is creating challenges for the country’s current account deficit as India remains the world’s third-largest importer and consumer of oil. Higher crude prices increase dollar demand from oil companies and weaken the rupee and foreign exchange reserves of the central bank.
Every $10 rise in oil adds ~$12–15 billion to imports, worsening the current account and increasing dollar demand.
Rupee weakness persists beyond oil shock
But this slide in the rupee is not a new phenomenon. Even before the Middle East crisis unfolded, the rupee remained on the back foot and was one of the worst-performing Asian currencies in 2025.
Between July 2025 and February 2026, USDINR moved from around 83.5 to 88, supported by dollar strength, US tariff developments, and steady debt outflows after the JPM index inclusion cycle. The West Asia situation has layered 7–8 rupees of premium on top of the above-mentioned factors, said Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.
Therefore, even if the US-Iran war resolves and crude oil prices slip back to pre-war levels, it might not mark the end of the rupee’s worry.
According to Banerjee, if the conflict eases meaningfully — with Hormuz reopening and a stable ceasefire — we could see some unwinding of that premium. A move back towards the 90–92 zone over a few sessions is quite plausible as importers unwind hedges and dollar demand normalises, he estimated.
“That said, it would be reasonable to expect the rupee to settle in the low 90s, rather than return to the 84–85 levels of early 2025,” he observed.
Vinit Bolinjkar, Head of Research at Ventura, said that a ceasefire could ease pressure—bringing crude below $90, improving sentiment, and supporting FPI flows—but any recovery is likely gradual, as rupee weakness is largely structural.
What else could drive rupee?
Apart from crude, pressure on the rupee stems from heavy FPI outflows (~ ₹2.2 lakh crore in 2026), weak FDI inflows, US-India trade uncertainty, and a strong dollar due to higher US rates, weighing on the domestic unit despite strong economic indicators. The dollar’s own trajectory is important. The dollar is currently supported by safe-haven flows. If US growth softens or the Fed signals rate cuts, that would naturally help emerging market currencies, the rupee included, said Banerjee.
The RBI’s role remains a factor. “Reserves are still at comfortable levels, and the central bank has been active in managing volatility. The objective at this stage appears to be smoothing the pace of the move rather than reversing its direction,” the Kotak Securities analyst added. The rupee today is responding to multiple variables, not any single one.
Is rupee at 100 a possibility?
The next mark that traders are eyeing warily is the 100 per dollar mark for the rupee as it trades dangerously close to the 97 level. While the possibility remains, analysts believe that it is not the base case scenario.
“In the most optimistic case, the conflict eases this month itself and Hormuz reopens in May. Oil prices could drift down towards $80 as inventories begin to rebuild, and USDINR could settle in the 90–92 range. This is the cleanest outcome for the rupee, but it requires a meaningful diplomatic breakthrough in the next two to three weeks,” said Banerjee. In the more adverse scenario, the conflict drags on, and Hormuz stays shut well beyond June–July.
Oil could rise substantially toward $140–150, and the rupee could attempt a breach of the 100 mark, though the timing of that breach would depend on how the supply situation evolves through the summer, he added. He expects RBI intervention to be extremely heavy, and the central bank may announce measures to boost USD inflows if USDINR inches closer to the 99-100 mark.
He added that the next four to six weeks on the Hormuz front will largely decide which of these plays out. “The 100 mark is not our base case, but it is a level worth being prepared for.”
Echoing a similar view, Bolinjkar said that upside for rupee ( ₹88–90) requires sustained oil below $80 and a trade deal, while downside ( ₹97–100) would need oil >$115 and continued capital outflows. Currently near ₹96, the rupee is likely to remain weak in the near term, with durable recovery dependent on lower oil prices and revival of capital inflows, he said.
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