The rupee falls when oil prices rise in the Middle East
The Indian rupee has lost more value, reaching its lowest level against the US dollar in three months as tensions between Israel and Iran grow. As global oil prices climb, India’s economy, which is highly reliant on imports, faces increasing strain. More than 85% of crude oil is imported. Brent crude and West Texas Intermediate (WTI) are both up more than 20% this month. People are concerned about rising fuel prices and a mounting current account deficit, which are driving inflation.
Because India relies on oil imports, any significant increase in global prices causes Indian refiners to demand more US dollars, making the rupee even weaker. According to experts, a $10 increase in oil prices may cause the current account deficit to exceed GDP by 0.4%. With Brent oil trading at around $76 and WTI oil at around $74, these concerns are becoming more real and pressing.
Geopolitics and Forex Volatility get worse
People are concerned that the US will become more involved in the long-running conflict after several reports, including one from The Wall Street Journal, stated that President Donald Trump had approved military preparations against Iran but was delaying their implementation until more information became available. People want to keep their money safe, which has kept the Dollar Index strong despite the Federal Reserve’s decision to leave interest rates unchanged. Statement from the Fed.
Political tensions in other countries have an impact on local markets. This may push India’s central bank to intervene to support the rupee. The USD/INR pair is currently trading near ₹86.70, indicating a positive trend.