MUMBAI: The Indian rupee tumbled to a record low of 92.41 against the US dollar on Wednesday, battered by a sharp rise in crude oil prices and a surge in safe-haven demand for the greenback as hostilities intensified in West Asia.
The rupee had breached the crucial 92 mark at open, compared with its previous close of 91.47. The Indian unit finally closed at 92.15 today, according to Bloomberg data.
Oil shocks and dollar demand
Traders said the rupee was pressured by heavy dollar demand from oil marketing companies and importers amid escalating regional tensions. Crude prices rose over $2 per barrel after fresh military strikes between Iran and Israel, which are expected to delay shipments and disrupt West Asian supply chains. The surge in oil, coupled with a rising dollar index, weighed heavily on emerging market currencies, including the rupee.
While state-owned banks were seen selling dollars on behalf of the Reserve Bank of India (RBI) to curb excessive volatility, market participants said the central bank is focused on smoothing swings rather than defending a specific level.
“RBI has been intervening but they are not intervening very aggressively. In other words, they are not intervening to block a certain level. They are just intervening to reduce the pace of depreciation,” Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services said.
He added that sentiment remains negative amid conflicting headlines. “There is yet no clarity when will this war stop and how long will it stretch. So, I would say we are still not out of the woods.”
Bhansali expects the Indian unit to trade in the 91-93.5 per dollar range in the near term. He said, “if crude oil rises to $90 per barrel, then probably the rupee may easily go to 93 or 94 also.”
India’s dependence on imported crude and deep trade linkages with West Asia make the currency particularly vulnerable. Iran’s blockade of the Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the Indian Ocean, could significantly impact India, which relies on the passage for roughly 50% of its monthly crude imports and more than a tenth of its non-oil exports. About a fifth of global crude oil flows through the strait.
India, the world’s third-largest oil buyer, consumes about 5.5 million barrels of crude oil daily, of which 1.5-2 million barrels pass through this choke point vital for global energy supplies. With India already lowering Russian oil imports, West Asia had emerged as an alternative over the past two months.
“As long as the uncertainty continues…I think we can see 92-93 levels until the issue settles,” VRC Reddy, treasury head at Karur Vysya Bank said, adding that RBI is continuously present in the market to contain the volatility.
So far in 2026, the rupee has depreciated by 2%, following a 5% fall in 2025 amid US tariffs and capital outflows. Analysts warn that increasing risk aversion could also prompt foreign investors to sell Indian equities.
“For foreign investors, currency volatility directly affects dollar adjusted returns. If depreciation outpaces yield differentials, it may deter portfolio inflows and potentially trigger FPI outflows,” Sachin Sawrikar Managing Partner at Artha Bharat Investment Managers IFSC said.
