The Indian Rupee had been relatively stable until recent geopolitical tensions escalated, particularly in the Middle East. Prior to March 15, 2025, expectations were that the rupee would maintain its value against the US Dollar. However, the situation took a drastic turn as the rupee breached the 94-per-dollar mark for the first time.
On March 15, 2025, the USD/INR pair reached 85.47 during trading, reflecting a significant depreciation of the rupee. This decline was primarily attributed to escalating geopolitical tensions and substantial foreign capital outflows. The Reserve Bank of India intervened in currency markets to stabilize the situation, but the damage was already evident.
India’s heavy reliance on imports from the Middle East, particularly crude oil, has compounded the issue. Approximately 85% of India’s crude oil imports come from these affected regions, leading to increased costs as Brent crude futures spiked above $105 per barrel. This inflation in import bills further pressured the rupee.
Since the onset of the Iran war, the rupee has fallen about 3%, and on March 15, foreign institutional investors sold equities worth Rs 5,518.39 crore on a net basis. Additionally, India’s forex reserves decreased by $7.052 billion to $709.759 billion in the week ending March 13, 2025, indicating a significant outflow of capital.
The Sensex also felt the impact, crashing 1,836.57 points, or 2.46%, to 72,696.39 on the same day. This market volatility reflects the broader economic concerns stemming from geopolitical instability.
Experts are weighing in on the situation. Anuj Choudhary noted, “We expect the rupee to trade with a negative bias as deteriorating global sentiments and geopolitical tensions may keep the rupee under pressure.” Meanwhile, Standard Chartered’s emerging markets report highlighted that the Indian Rupee faces triple pressure from geopolitics, commodities, and capital flows.
ING added that this environment is particularly favorable for the dollar, especially against higher beta currencies, further complicating the outlook for the rupee. The Reserve Bank of India is employing multiple policy tools to address these challenges, but the path ahead remains uncertain.
As the USD/INR pair surged to 94.40 during trading on October 9, 2025, the implications of these developments will continue to unfold, affecting not only the currency markets but also the broader Indian economy.
