Indian Rupee Weakens 33 Paise to 94.58 Against US Dollar Amid Rising Tensions Over US-Iran Hostilities

Rupee Slips as US-Iran Tensions Escalate

The Indian rupee opened 33 paise lower on May 8, snapping a two-day gaining streak, amidst renewed clashes between the United States and Iran. This development has put pressure on the already fragile ceasefire deal, causing crude oil prices to surge above $100 a barrel. The rupee opened at 94.58 against the dollar, after ending the previous session at 94.25.

The benchmark Brent crude oil price rose by more than 1 percent overnight, trading at $101 a barrel. This increase is attributed to a fresh round of fighting between the US and Iran, which has dampened hopes of opening the Strait of Hormuz, a key energy route that has been shut off since the start of the war. Despite the fresh clash, US President Donald Trump stated that the ceasefire is still in effect.

India meets approximately 85 percent of its energy needs through imports. Higher Brent crude prices add to the country's import bill, widening the current account deficit, which weighs on the currency. The rupee remains under pressure as oil refiners have been buying the greenback to hedge positions and pre-empt further weakness in the home currency, according to traders.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The Reserve Bank of India (RBI) is taking measures to prevent the rupee from entering a sharp depreciation bias by selling dollars intermittently.

Key Expectations for the Rupee

According to Amit Pabari, managing director at CR Forex Advisors, the Rs 94-Rs 93.80 range is expected to act as a strong support zone, and the rupee may bounce back towards the Rs 94.50-Rs 94.80 levels.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Despite the uncertainty and growing weakness amid foreign capital outflows, the rupee is expected to hold its ground against the dollar, as per a Reuters poll of currency analysts. A median view from 39 currency analysts polled between May 4 and May 6 suggests that the rupee is expected to trade around the current rate of 95 to a dollar over the coming year.

The rupee has weakened by about 5 percent so far this year, following a similar decline last year. It has slipped by an average of 1 percent a month in 2026, reaching record lows in most weeks since the US and Israel launched strikes on Iran on February 28.