Indian Rupee Hits New Low, Dipping 19 Paise to 95.50 Against the US Dollar Amid Crude Oil Concerns

Indian Rupee Hits New Low Against US Dollar Amid Global Tensions

The Indian rupee sank to a new low of 95.50 against the US dollar at the open on May 12, following a statement by US President Donald Trump that the ceasefire with Iran was "on life support." This move sent Brent crude prices higher, further dampening investor sentiment.

The rupee opened 19 paise down at a record low of 95.50 against the dollar after ending the previous session at 95.31. Just last week, the rupee had hit a new low of 95.43. The currency's vulnerability to rising oil prices continues to be a concern, and this opening at Rs 95.50 per dollar marks a new low in the life cycle of the currency.

The ceasefire between the US and Iran is increasingly looking shaky, with Washington rejecting Tehran's response to its peace offer. This development means prolonged disruption of the Strait of Hormuz, a critical waterway that has sent Brent crude prices above $105 a barrel. Trump's statement has also hinted at renewed hostilities, further dampening investor sentiment.

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Investor sentiment has been further dampened after Prime Minister Narendra Modi urged citizens to exercise restraint in fuel consumption and gold purchases. While the Reserve Bank of India (RBI) has been intervening, a depreciation bias is on the cards, according to traders.

Oil Prices Remain Critical for India

For India, which imports 85 percent of its oil needs, crude prices remain critical. The outlook is cloudy, with a Reuters survey showing that OPEC oil output in April fell to its lowest level in over two decades. Disruptions linked to near-closure of the Strait of Hormuz have prompted producers to curtail exports.

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Saudi Aramco CEO Amin Nasser warned that disruptions to oil exports through the strait may delay a return to market stability until 2027, with the loss of about 100 million barrels of oil per week. Investment bank JP Morgan expects global oil prices to remain in the "low $100s" for much of this year, even if the Strait of Hormuz reopens as early as next month. Supplies of oil in the region would not return to normal service quickly.

JP Morgan's analysis suggests that oil prices should remain in the low $100s for most of the rest of this year, averaging $97 for 2026 as a whole. The analysis also notes that the bottleneck would likely shift from the Strait itself to tanker availability, refinery ramp-ups, and wider logistical constraints.