The Indian rupee weakened past 92 per dollar for the first time on Wednesday as an intensifying war in West Asia drove oil prices sharply higher, heightened the risk of portfolio outflows and raised concerns about remittance flows from diaspora in the region.
The rupee fell to 92.17 to the dollar, down 0.7%, eclipsing its previous all-time low of 91.9875 hit in late January.
The widening West Asia conflict threatens to hit India through multiple external channels. The country imports more than 80 per cent 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.
At the same time, heightened risk aversion could trigger foreign portfolio outflows from Indian equities, while any disruption to economic activity in West Asia risks weighing on remittance inflows from Indians working in the region.
“Remittances from West Asia 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, following losses in US stocks, as surging oil prices heightened 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 brief and short-lived periods of recovery.
The currency has declined more than 2 per cent since the start of the year, making it one of the worst performers in emerging markets, after having fallen roughly 5 per cent against the dollar in 2025.
“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. “After all, fast-moving market dynamics (like importers buying FX while exporters not selling as rapidly) have been impacting the currency of late.”