On March 19, the Indian rupee hit a record low due to worsening losses brought on by an interruption in global energy supplies during the Middle East conflict, which could disturb India’s growth-inflation balance.
Against the US dollar, the rupee dropped 065% to 93.24, surpassing its previous low of 92.63 on Wednesday. Since the start of the US-Iran conflict, the local currency has lost around 2% of its value. Following strikes on vital energy infrastructure in the Gulf area, oil prices spiked to about $120 per barrel on Thursday before falling on Friday.
Concerns over the oil price shock have caused foreign investors to withdraw more than $8 billion from local stocks so far in March—the biggest monthly outflows since January 2025—so the pressure on the rupee is unlikely to lessen in the immediate future.
According to analysts, a prolonged rise in energy costs could hinder India’s economic growth and boost inflation.
A longer “higher-for-longer” cycle than markets had predicted is reinforced by the Fed’s decision to keep rates in the 3.5–3.75% range, high inflation forecasts, and escalating geopolitical concerns around Iran. The crucial factor for India is the continued appreciation of the dollar, which might put pressure on the rupee and possibly spur FII outflows, especially in debt markets.
