The ‌Indian rupee slid to a record low on Tuesday as a fragile ​truce in the Middle East came under strain after the U.S. ⁠and Iran launched new attacks to wrestle for control of the Strait of Hormuz, a key artery for global energy supplies. The currency weakened to 95.4325 per dollar, down as much as 0.4% ‌on the day and eclipsing its previous all-time low of 95.33 hit last Thursday. It pared losses to end the session at 95.28.

State-run banks ‌were spotted offering dollars near the rupee’s record low, which traders said ‌were ⁠most likely on behalf of the Reserve Bank of India and intended ⁠to prevent the currency from falling to the key psychological level of 95.50.

Other oil-sensitive Asian peers such as the Indonesian rupiah and Philippine peso were also under pressure on Tuesday.

Brent crude’s surge from around $70 ​to near $115 a barrel following the ‌outbreak of the U.S.–Iran war in late February has materially worsened the rupee’s outlook. The rise in energy costs has raised concerns over India’s external balances and inflation outlook, prompting economists to mark up current account deficit projections, trim growth forecasts, raise ‌inflation estimates and bake in expectations for a materially weaker rupee.

Analysts at ​MUFG reckon that the currency will hover between 95-96 in their base case of gradual de-escalation in the conflict but it could weaken ⁠to 97-98, or even weaker, in a risk scenario of prolonged escalation. On Tuesday, India’s benchmark Nifty 50 was down 0.3%, while the yield on the 10-year benchmark bond was ‌a tad higher at 7.02%.

CRISIS TOOLKIT

The Reserve Bank of India is studying ways to mobilise dollar inflows to bolster its foreign exchange buffers and cushion rising pressure on the rupee, according to a Reuters report on Monday. The consideration of such measures follows the central bank’s crackdown on arbitrage trades, which had exacerbated volatility in the currency. The central bank has intervened heavily in the spot and forward FX markets to stem the ‌rupee’s fall, a move reflected in declining FX reserves and a surge in its short dollar forward commitments ​to a record above $100 billion.

Traders expect the central bank to continue intervening in the markets to curb excessive volatility.

Other central banks have ⁠stepped into the foreign exchange market as well. The Bank of Japan likely intervened to support ⁠the yen, while the Indonesian central bank said it would take consistent and measured steps to safeguard the rupiah after the currency hit a record low ‌earlier in the day. Governments in Asia, the top oil importing region, are also scrambling to find alternatives and insulate their economies from the worst of the ​energy crisis triggered by the Iran war.

Published on May 5, 2026