The Indian rupee plunged to a fresh all-time low of 95.58 against the US dollar on May 12, hit by soaring crude oil prices and rising geopolitical tensions involving Iran. The domestic currency had already recorded its steepest single-day fall in over a month on May 11, closing at a then-record low of 95.31 per dollar.
The sharp decline in the rupee comes amid growing fears that escalating tensions in West Asia could disrupt global crude oil supplies. Brent crude prices climbed above the $105 per barrel mark, raising concerns for India, which imports more than 80% of its crude oil needs. Higher oil prices typically increase dollar demand from importers and widen the country’s trade deficit, putting additional pressure on the rupee.
Currency traders said heavy demand for the US dollar from oil companies and importers, along with continued foreign fund outflows from Indian equity and debt markets, further weakened the rupee. The strengthening of the US dollar globally has also added strain on emerging market currencies, including the Indian rupee.
The rupee’s record fall also weighed heavily on domestic financial markets, with benchmark stock indices witnessing sharp volatility during Monday’s trading session. Analysts warned that if crude oil prices continue to rise and geopolitical uncertainty deepens, the rupee may remain under pressure in the coming days, increasing inflationary risks for the Indian economy.