Rupee Hits Record Low as US-Iran War Pushes Brent Crude Near $115

Mumbai | 5 May 2026  

Why Is the Rupee at a Record Low? 

The Strait of Hormuz, a waterway responsible for transporting approximately 20% of global crude oil supply, has been effectively blocked as a result of the conflict. The disruption has removed roughly 15mbpd from global supply. 

Partial offsets are in place. The IEA has released approximately 400 million barrels from strategic reserves, alternative export routes bypassing the Strait are moving around 6.2mbpd, and selective Hormuz access accounts for a further 10.1mbpd. Together, these measures have narrowed the gap, but a residual supply shortfall of approximately 4.8mbpd remains. 

That tightness has driven Brent crude from around $70 to near $115 a barrel since the war broke, directly worsening India’s import bill and putting sustained pressure on the rupee.  

How Are Asian Currencies Responding? 

India is not alone in facing currency pressure. The Indonesian rupiah and Philippine peso both weakened on Tuesday as Gulf hostilities tested a fragile truce. Indonesia’s central bank said it would take consistent and measured steps to manage pressure on the rupiah. 

The rupee has fallen 4.5% since 28 February, in line with other oil-importing economies across Asia.  

What Is the RBI Doing? 

The Reserve Bank of India has intervened heavily in both spot and forward foreign exchange markets to limit the rupee’s fall. Its short dollar forward commitments have risen to a record above $100 billion. 

The RBI is studying ways to attract dollar inflows and strengthen its foreign exchange. 

• Reviving a mechanism last used during the 2013 taper tantrum to attract dollar deposits from non-resident Indians 

• Scrapping withholding tax on overseas bond investors to encourage foreign inflows 

These measures remain under consideration and have not been formally announced. 

Will Crude Prices Stay Elevated? 

Demand is beginning to adjust to higher prices. The IEA expects global oil demand to contract by approximately 1.5mbpd in the second quarter of 2026, with demand destruction of around 2.5mbpd estimated for April 2026 alone. The EIA has separately cut its US and Europe demand forecast by approximately 1.0mbpd for 2026. 

If demand destruction absorbs the residual supply gap of 4.8mbpd, crude prices could face downward pressure from current elevated levels. For now, elevated energy costs continue to weigh on India’s inflation outlook and external balances. 

How Are Indian Markets Reacting? 

The benchmark Nifty 50 fell 0.3% on Tuesday, while the yield on the 10-year government bond rose 3 basis points to 7.04%.  

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