Rupee Slides Sharply Amid Geopolitical Tensions, Oil Spike Adds Pressure On Currency

Mumbai: The Indian rupee weakened significantly by 56 paise to 86.08 against the US dollar in early Friday trade, pressured by escalating geopolitical tensions in the Middle East and a steep rise in global crude oil prices. The drop comes amid fresh Israeli airstrikes on Iranian nuclear facilities, sparking fears of a broader regional conflict and denting investor risk appetite.

At the interbank foreign exchange market, the rupee opened at 86.25 and later recovered slightly to 86.08, marking a notable decline from Thursday's closing level of 85.52. Forex analysts attributed the sharp fall to heightened uncertainty in global markets following explosions in Tehran and mounting tensions around Iran's nuclear ambitions, alongside a robust US dollar.

"The rupee opened weak as hostility in the Middle East kept tensions boiling and risk appetite took a hit with Gift Nifty down 285 points," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

The dollar index, a measure of the greenback’s strength against six major global currencies, advanced 0.31 percent to 98.22, adding further pressure on emerging market currencies like the rupee.

Concurrently, Brent crude prices surged by 8.59 percent in futures trade to USD 75.32 per barrel, raising concerns over India’s trade deficit and inflation trajectory due to higher import bills.

On the domestic front, Indian equity markets mirrored the global nervousness. The BSE Sensex tumbled 1,337.39 points to 80,354.59, while the NSE Nifty plummeted 415.2 points to 24,473 in early trade. Foreign institutional investors (FIIs) remained net sellers, offloading equities worth Rs 3,831.42 crore on Thursday.

Tragically, sentiment was further dampened by the country’s worst aviation disaster in recent years — a London-bound Air India flight crashed into a medical college complex in Ahmedabad just after takeoff, killing at least 265 people, including several on the ground.

In a silver lining, India’s retail inflation eased to 2.82 percent in May — the lowest in over six years — largely due to subdued food prices, staying well below the Reserve Bank of India’s 4 percent median target for the fourth consecutive month.

Looking ahead, Bhansali said, “The rupee may move in a range of 85.70 to 86.25 for the day. RBI intervention is likely to curb volatility. Exporters should consider selling, while importers might wait for more clarity.”

(With agency inputs)