Daijiworld Media Network – Mumbai

Mumbai, May 20: The Indian rupee plunged to a record low against the US dollar on Wednesday as continued uncertainty over US-Iran peace talks kept global crude oil prices elevated, intensifying fears of rising inflation and tighter monetary policies worldwide.

The rupee weakened to 96.96 against the dollar, breaching its previous all-time low of 96.6150 recorded in the earlier session.

Since the outbreak of the Iran conflict in late February, the Indian currency has depreciated nearly six per cent amid mounting pressure from rising energy prices and sustained foreign capital outflows.

Market analysts said the prolonged geopolitical tensions have sharply increased concerns over India’s balance of payments situation, particularly due to the country’s heavy dependence on crude oil imports.

Brent crude prices have reportedly surged by more than 50 per cent since the conflict began, significantly increasing India’s import burden and adding pressure on inflation.

At the same time, foreign institutional investors have withdrawn more than 22 billion dollars from Indian equity and bond markets during the period, further weakening market sentiment.

Economists warned that while a weaker rupee can make exports more competitive and reduce import demand over time, sustained depreciation risks creating a cycle of further currency weakness and declining investor confidence.

According to economists at Citi, persistent foreign exchange depreciation may not necessarily restore external balance and could instead accelerate capital outflows.

The report noted that continued energy shocks could push the dollar-rupee exchange rate close to 98 in the near term if geopolitical tensions persist.

However, the economists also projected that the rupee could recover towards the 95-mark in the latter half of fiscal year 2027 if the conflict eases or policymakers take decisive measures to stabilise the economy and address balance of payments concerns.

Meanwhile, rising crude prices and inflation fears have also fuelled expectations of tighter monetary policies by major central banks globally, leading to higher bond yields and increased volatility across equity markets.

Financial markets continue to remain under pressure amid concerns that prolonged geopolitical uncertainty and elevated energy costs could further slow global economic growth.