The rupee opened at 96.17 per dollar on Monday, compared to Friday’s close of 95.97, before touching an all-time low of 96.20 in early trade. It was last quoted at 96.18, down 0.2% on the day, eclipsing its previous record of 96.1350. High crude oil prices is seen as a key concern for the currency market. Additionally, global bond yields, especially US yields, are also soaring, denting risk appetite and deepening economic headwinds confronting the world’s third-largest crude importer.
This marks the fifth straight session in which the currency has set a new all-time low. Since the Iran conflict began in late February, the rupee has declined 5.5%. It has also been the worst-performing currency in Asia in 2026.
Possible RBI intervention on Friday
The Reserve Bank of India is believed to have intervened in the foreign exchange market on Friday after the rupee slipped past 96 per dollar, according to traders. Market participants expect the central bank to continue managing excessive volatility rather than defending a specific level.
Indian equity benchmarks fell sharply at Monday’s open as escalating tensions in the Middle East drove oil prices to a two-week high and sent the rupee to an all-time low, compounding an already fragile macroeconomic outlook for Asia’s third-largest economy.
The Nifty 50 dropped 1.1% to 23,391.9, and the BSE Sensex fell 1.16% to 74,374.04 as of 9:16 a.m. IST. All 16 major sectors were in the red.
Oil prices and geopolitics trigger selloff
The immediate trigger was a drone attack on a nuclear power plant in the United Arab Emirates, which rattled energy markets and pushed Brent crude above $112 a barrel. US President Donald Trump added to unease by warning that “the clock is ticking” for Iran, signalling that diplomatic efforts to end the conflict have made little headway. Other Asian markets fell 0.8% in early trade.
Rising US yields add to pressure
The selloff in the rupee and equities was not driven by oil alone. The benchmark 10-year US Treasury yield climbed to 4.625%, extending a run of gains as investors recalibrated expectations around inflation and the pace of monetary tightening in the United States. Higher real yields in the US reduce the relative attractiveness of emerging-market assets, prompting dollar demand and currency weakness across the region, as per Reuters.
India’s domestic bond market has moved in tandem. The benchmark 10-year government bond yield rose last week as markets began pricing in the inflationary impact of expensive crude on the fiscal and current account positions.
Macro concerns mount
Economists have flagged that if oil prices remain at current levels, the consequences for India’s macroeconomic fundamentals could be significant. Elevated crude raises imported inflation, widens the current account deficit, and complicates the fiscal arithmetic for a government that has limited room to absorb an extended energy shock.
Concerns around potential disruptions to the Strait of Hormuz have added another layer of uncertainty for markets already wary of a prolonged conflict.