Indian rupee hits record low as Iran war fuels energy shock

The Indian rupee dropped past the 93-per-dollar mark for the first time on Friday, March 20, underscoring mounting concerns over the economic impact of disruptions to global energy supplies caused by the war with Iran, as per the latest Reuters report.

The currency weakened by around 0.7% to 93.2750 against the US dollar, surpassing its previous record low of 92.63 set on Wednesday, March 18. Indian financial markets had been closed on Thursday due to a local holiday.

Since the outbreak of the Iran war, the rupee has declined by more than 2%, reflecting fears that sustained high crude oil prices could slow economic growth and drive up inflation in India, the world’s third-largest oil importer and consumer.

The oil shock has also triggered significant capital outflows, with foreign investors pulling more than $8 billion from Indian equities this month — the largest outflow since January 2025.

With no signs of easing in the conflict, which has killed thousands, expanded across the Middle East, and disrupted global energy flows, analysts warn that the rupee remains vulnerable and could weaken further toward 95 per dollar.

“The rupee could be more vulnerable if the conflict drags on, which mainly reflects its exposure to higher energy prices,” said Vivek Rajpal, Asia macro strategist at JB Drax Honore.

“Currencies backed by strong policy frameworks and external balances should remain relatively resilient while energy dependent currencies are likely to stay vulnerable,” he added.

Oil prices recently surged to nearly $120 per barrel before easing on Friday, March 20, as some countries signaled willingness to support efforts to secure safe shipping routes through the Strait of Hormuz.

The rupee’s decline is part of a broader trend. Over the past year, it has faced persistent pressure from factors including trade tensions with the US, conflicts in key energy-producing regions, and sustained foreign selling of Indian stocks, prompting investors to increase short positions against the currency.

Over the last 12 months, the rupee has depreciated by 7% against the US dollar and has also weakened significantly against other major currencies, including the euro, the British pound, and the Chinese yuan.

The current oil shock has further weighed on India’s financial markets, pushing equities to their lowest levels in about a year, increasing bond yields, and raising concerns about widening fiscal and current account deficits.

Despite these pressures, interventions by the Reserve Bank of India have helped limit the currency’s decline. The central bank has been actively supporting the rupee, selling more than $50 billion between April and December 2025, with analysts expecting further intervention this year.

These measures have allowed the rupee to weather the turmoil somewhat better than some regional peers, such as the South Korean won and the Thai baht, though risks remain elevated as the global energy situation evolves.

By Tamilla Hasanova