Rupee Opens Lower At 96.40 As Oil Surge, Middle East Tensions Weigh

The Indian rupee opened 12 paise lower at 96.40 against the U.S. dollar on July 20, as a sharp rise in crude oil prices and renewed geopolitical concerns weighed on the domestic currency.

The rupee has fallen 1.7% so far in July and is approaching its record low of 96.96 per dollar, recorded in May. The latest decline comes as Brent crude moved above $90 a barrel after the conflict between the U.S. and Iran intensified.

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Crude Oil Rally Adds Pressure

Brent crude futures rose 2.7% on Monday, crossing $90 a barrel for the first time in nearly six weeks. The rise in the crude oil price has renewed concerns over India’s import bill, given the country’s dependence on overseas energy supplies.

The rupee had found some support earlier after crude oil prices declined towards $70 a barrel. Measures introduced by the Reserve Bank of India to encourage dollar inflows, along with stronger foreign portfolio investment into Indian equities, also helped the currency recover temporarily.

That support has since weakened as oil prices have moved higher again. The latest rise in the crude oil price has brought renewed pressure on the rupee, with the currency now trading close to its previous record low.

Middle East Conflict Raises Supply Concerns

In addition, geopolitical tensions have been rising due to the fact that the U.S. has undertaken its ninth night of strikes on Iran, and attacks from Iran have been taking place against Kuwait and Bahrain.

This conflict has also impacted the shipping activities taking place in the Strait of Hormuz, a critical passage through which oil is shipped globally. There have been attacks involving maritime shipping as well.

For India, sustained strength in the crude oil price could add pressure to the trade balance and increase sensitivity around inflation, while a weaker rupee raises the domestic cost of imported commodities.

The rupee’s movement in the coming sessions will therefore remain closely linked to developments in the Middle East, the direction of global crude oil prices and dollar flows into Indian markets.