Indian Rupee Stabilizes as US-Iran Truce Eases Oil Prices

The Indian rupee experienced significant volatility in May 2026, fluctuating between a record low of 96.96 and a recovery to 95 per dollar. The currency's decline was driven by a strengthening US dollar, foreign capital flight—totaling $24 billion between March and May—and spiking crude oil prices resulting from war in Iran. Narendra Modi characterized this global instability as a "decade of disasters," while the government faced inflated import bills and debt repayments.

Recovery efforts by the Reserve Bank of India, involving aggressive dollar-selling interventions, initially pushed the rupee back toward 95.23 in late May. However, gains were briefly erased after the United States allegedly violated a ceasefire with missile strikes near the Strait of Hormuz, pushing Brent crude prices back toward $100 per barrel.

The currency finally stabilized on May 29, closing at 95 per dollar, its best single-day gain in two months. This surge followed a proposed 60-day extension of the truce between the United States and Iran, awaiting approval from President Donald Trump. The agreement aims to ensure traffic flow through the Strait of Hormuz and has lowered Brent futures to approximately $91 per barrel. Markets are now awaiting the Reserve Bank of India's monetary policy decision on June 5, with economists expecting interest rates to hold at 5.25%.