Iran War impact: Rupee at fresh record low amid crude boil; how it will impact your stocks

The Indian rupee hit a record low, breaching the 94-per-dollar mark on Friday, March 27, hammered by worries over an energy supply crisis sparked by the Middle East war. The move puts the currency on track for its first fiscal-year drop since the 'taper tantrum', with the domestic currency headed for a 10 per cent fall in the financial year 2025-26.

The rupee fell to 94.30 per dollar, eclipsing its previous all-time low of 93.98 hit earlier this week. It has declined nearly 3.5 per cent since the war began last month and nearly 5 per cent so far in 2026. The Indian currency is said to be the worst-performing currency among major economies in the world this year.

The Indian rupee is touching an all-time low as escalating US-Iran tensions compound existing macroeconomic pressures. The geopolitical crisis is driving crude oil prices higher, directly threatening India's import bill and current account balance. Combined with persistent dollar strength, a widening trade deficit, and foreign portfolio outflows, the rupee faces structural headwinds.

Master Capital Services, in its recent note on the Indian rupee, said that the escalating US-Iran military engagement and risks of disruption in the Strait of Hormuz are pushing WTI crude towards $100–110 per barrel, directly pressuring India's oil import bill, in which petroleum and petroleum products account for 25–30 per cent of total imports.

"Every $10 per barrel increase in crude prices adds $14–16 billion to India's annual import bill, further straining the current account deficit and weakening rupee fundamentals. The Fed's higher-for-longer stance, combined with safe-haven flows into the dollar due to geopolitical uncertainty, continues to strengthen the dollar index, which may apply additional downward pressure on the rupee," it said.

FPIs have increased selling in Indian equities as risk-off sentiment dominates emerging markets amid the escalating conflict, Master Capital noted. "Despite forex reserves of around $716.81 billion, aggressive rupee defence is limited as higher crude prices drain reserves faster, while the RBI must balance inflation management with currency stability."

The brokerage expects heightened volatility, with the rupee likely testing the 95–96 levels if crude remains around $100 per barrel and geopolitical risks increase. From an equity market perspective, it sees more FII outflows and dented margins for OMCs, airlines, paints, autos, capital goods companies, and consumer durable firms.

On the other hand, Master Capital sees a 1–2 per cent revenue boost for IT players, textiles, specialty chemicals, and other exporters on the back of better dollar realisation. "Expect volatility with a defensive bias; Nifty support is seen in the 22,450–22,300 range and resistance in the 23,050–23,150 range amid macro headwinds," it added.

Societe Generale also recommends shorting the rupee against the dollar, with a target of 96. "RBI interventions look to be less aggressive, and market chatter is turning to the need for FX reserves to be drawn down sparingly. The RBI’s focus looks to have shifted towards capping the 10-year IGB yield below 7 per cent while letting FX gradually depreciate," Reuters reported, citing the note.

On the other hand, Bernstein sees a realistic chance of the rupee breaching the 98-per-dollar level this year, even if a prolonged conflict is avoided, with pressure primarily stemming from India's current account balance.