The rupee weakened to a one-month low on Monday as escalating tensions between Iran and the US over the weekend pushed crude oil prices higher and triggered a risk-off mood across emerging markets.
The rupee opened 25 paise lower at 91.2462 per dollar and slipped to an intraday low of 91.4025, its weakest level in about a month, according to Bloomberg data. It had closed at 90.9775 on Friday.
Brent crude surged towards $80 a barrel in Asian trade, while the dollar strengthened as investors assessed the fallout from US and Israeli strikes on Iran and the reported killing of Iran’s Supreme Leader, Ayatollah Ali Khamenei.
Heightened geopolitical risks and rising oil prices have left the rupee particularly exposed, given India’s heavy reliance on imported crude and strong trade linkages with West Asia.
Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services, said the near-term outlook for the rupee had turned negative amid weak global equities and cautious sentiment. He indicated that if Brent crude sustains above $80 a barrel, the rupee could move towards 91.50–92 levels.
At the same time, he suggested that the currency may not remain near 92 per dollar for an extended period, as market direction would depend on geopolitical developments and foreign institutional investor flows. He cautioned that if crude prices climb to $90, the rupee could weaken further towards 93, as higher oil prices would directly affect inflation expectations, the current account deficit and overall market sentiment.
Oil-importing Asian currencies such as the rupee are more vulnerable in a scenario of sustained price increases. India, the world’s third-largest oil consumer, uses around 5.5 million barrels of crude a day. Nearly half of its monthly crude imports pass through the Strait of Hormuz, underscoring the risks from any prolonged disruption in the region.
On inflation, Gaura Sengupta, chief economist at IDFC FIRST Bank, downplayed immediate risks. She said retail petrol and diesel prices had largely remained unchanged in recent years, and any temporary spike would likely be absorbed by oil marketing companies. However, she cautioned that sustained upside in crude prices could pose risks to the current account deficit over time.