The Indian rupee weakened past 92 per dollar for the first time on Wednesday, with traders citing likely intervention by the central bank to avert a steeper fall in the face of an intensifying war in the Middle East.
The rupee INR=IN fell to 92.17 to the dollar, down 0.7%, eclipsing its previous all-time low of 91.9875 hit in January. Global markets tumbled on worries that the war could deliver an energy shock that raises inflation and delays interest rate cuts.
The widening Middle East conflict threatens to hit India through multiple external channels. The country imports more than 80% of its crude oil needs, making the rupee highly sensitive to oil price shocks that swell the import bill, widen the current account deficit and quicken inflation.
Further, heightened risk aversion drive foreign investors out of Indian equities, while extended disruption to economic activity in the Middle East risks weighing on remittance flows from Indians working in the region.
“Remittances from the Middle East as well as capital flows are likely to get impacted in the scenario of an extended regional conflict,” analysts at Kotak Mahindra Bank said in a note.
“In the case of an extended crisis, India’s macroeconomic outlook is expected to weaken through widening of current account deficit, higher inflation, sharper rupee depreciation and lower GDP growth.”
OIL SOARS, EQUITIES SLUMP
Asian equities fell sharply on Wednesday, as surging oil prices sharpened concerns about global economic growth and inflation. Brent crude has risen more than 13% since the war broke out over the weekend.
The oil shock comes at a time when the rupee has already been under sustained pressure for months, punctuated only by short-lived periods of recovery.
The currency has declined more than 2% since the start of the year, making it one of the worst performers in emerging markets, after having fallen roughly 5% against the dollar in 2025.
JITTERY MARKETS
The Mideast war has pushed optimism around a potential U.S.-India trade deal to the background. Market participants had earlier hoped a pact could support the rupee with lower tariffs, boosting exports and easing pressure on the external balance.
“We believe the impact of higher oil prices will show up in the INR even before it shows up on external accounts,” analysts at HSBC Bank said in a note.
The U.S. and Israeli air war against Iran has widened since Israel’s first attacks on Saturday.
Israel has attacked Lebanon, and Iran has responded with strikes against energy infrastructure in Gulf countries and tankers in the Strait of Hormuz, through which a fifth of the world’s oil and liquefied natural gas typically passes.
“For financial markets, the focus remains on the risk of any sustained regional conflagration and oil supply disruptions in the Strait of Hormuz and the resultant risk to energy prices,” analysts at Standard Chartered said in a note.
(With inputs from Reuters)
Zubair Amin is a Senior Journalist at NewsX with over seven years of experience in reporting and editorial work. He has written for leading national and international publications, including Foreign Policy Magazine, Al Jazeera, The Economic Times, The Indian Express, The Wire, Article 14, Mongabay, News9, among others. His primary focus is on international affairs, with a strong interest in US politics and policy. He also writes on West Asia, Indian polity, and constitutional issues. Zubair tweets at zubaiyr.amin
