Indian Rupee Plummets to Record Low Amid Iran Conflict Oil Shock

The Indian rupee slid to an all-time low of 96.39 per US dollar on May 18–19, 2026, capping a decline of more than 5.5% since the Iran conflict began on February 28. The currency set fresh records across five consecutive sessions, making it Asia's worst-performing currency of the year. Brent crude oil prices climbed near $110 per barrel, driven by the effective closure of the Strait of Hormuz and drone strikes on a nuclear power plant in the United Arab Emirates, which stalled diplomatic efforts to end the conflict. The Reserve Bank of India burned through roughly $38 billion in foreign exchange reserves—depleting them from approximately $728 billion to $690 billion—conducting dollar-selling interventions and restricting banks' net open positions to slow the rupee's fall. The Government of India responded with regulatory curbs on silver imports, raised import duties on gold and silver, and hiked petrol and diesel prices twice within a week. Foreign institutional investors pulled over $23.5 billion from Indian stocks and bonds since March, widening the current account deficit and pushing India's global economic ranking below the United Kingdom.

U.S. President Donald Trump warned Iran to act quickly as peace efforts stalled, then announced a pause in attacks to facilitate negotiations, later signaling a possible nuclear deal. India separately confirmed it would continue purchasing Russian oil based on commercial viability and energy security, regardless of U.S. sanctions waivers. Analysts at BofA Global Research forecast the rupee could reach 98 per dollar by year-end, while others warned it could slide to 100–102 if oil remains above $100 per barrel and the central bank halts intervention. Domestic impacts have been severe: 80% of processing units in Kerala's cashew industry have shut down, and manufacturers face surging input costs.