After gaining for three straight days, the rupee settled lower on Tuesday as international oil prices rose following fresh military strikes on Iran.
Brent oil neared $100 a barrel again after slumping more than 7 per cent on Monday, as US forces struck missile-launch sites and boats trying to place mines near the Strait of Hormuz.
The Indian unit ended the day at 95.66/$, down 0.48 per cent from the previous close of 95.23/$. The rupee has weakened 0.8 per cent against the dollar in May.
“Recently, the INR has appreciated from around 97 levels to near 95, mainly driven by improved risk sentiment in global markets and RBI intervention, along with some corporates selling dollars. However, there is still global uncertainty, which is affecting risk appetite and has led to a rise in crude oil prices, adding pressure on the rupee,” a dealer at a private bank said.
Dealers said that although the RBI was actively defending the 95.40–95.45 levels, later it did not intervene in the market, which is also likely to have led to the fall in the rupee.
During the day, the local currency appreciated to 95.34 per dollar. The dollar index was up 0.06 per cent at 99.05 and Brent crude oil prices rose close to $100 per barrel in Asian trade on Tuesday, after reports said that the US had carried out fresh attacks against Iran.
“The US attacked Iran overnight, thus keeping the conflict in an unresolved position, with the Strait of Hormuz still not opened except for a few ships which were allowed by Iran. The rupee fell to 95.6800 as oil prices rose to near $100 per barrel while the dollar index was steady at 99.07. RBI was protecting the level of 95.45 vehemently but suddenly left it after there was consistent demand for the whole day and oil prices rising. It then protected the level of 95.6150 for the day,” a report by Finrex Treasury Advisors said.
The rupee has depreciated over 6 per cent in 2026, with the fall intensifying after the West Asia war started in late February. The war and subsequent closure of the Strait of Hormuz disrupted the supply of oil. Rising international oil prices threaten to worsen India’s external conditions as the country imports more than 80 per cent of its oil requirements.
“High oil prices are further widening the external funding requirements via a larger current account deficit, which will likely reach 1.9 per cent of GDP in FY27, assuming oil prices average $95 per barrel,” ANZ Research said in a note, adding that the deficit is more than double the estimate of 0.8 per cent of GDP for FY26.