Singed by Iran fire, Rupee drops 108 paise in single session, worst fall in 4 years

MUMBAI: The rupee fell to a record low of 93.71 on Friday, dropping 108 paise from its previous close of 92.63, marking its sharpest single-day decline in four years, as fears of oil prices staying above $100 for longer intensified with the West Asia conflict widening to attacks on energy infrastructure in the region.Forecasters are now talking about the rupee breaching 95 levels in the next six months. “We continue to expect the rupee to remain under pressure, reflecting a likely balance of payments deficit and a large net short forward book, which has likely exceeded the last published estimate of around US$62 billion (Dec 2025),” said Santanu Sengupta, chief India economist at Goldman Sachs, in a recent report.“There is no sign of deescalation in the Middle East, with Brent touching $116 (a barrel) yesterday (Thursday) and now around $106… There is also no end to FII sell-off in the equity market, with a net sell of approximately Rs 80,000 crore, which is more than $8.5 billion, from March 1 till yesterday. This adds more pressure to the falling rupee,” said K N Dey, a forex consultant. He added that there is huge year-end demand for dollars and, unless there is deescalation, the pressure would continue.With energy supply disrupted and prices of oil and gas soaring, a weaker rupee adds to the pressure on inflation, which, at 3.2% in Feb, is currently within the tolerance zone. But economists are worried as a prolonged conflict will push up prices of a host of commodities, with a weak rupee further stoking inflation. Market players said that RBI has been intervening in the market to arrest a steep slide, but it has had limited impact.Spending by Indians on overseas education and travel is already declining because of visa restrictions and geopolitics, and the unfavourable exchange rate is expected to be another factor.So far, 2025-26 is the worst financial year for the rupee in the last decade. The only other financial year in history when the rupee has depreciated more in absolute terms was 2008-09, when the rupee weakened by 1,058 paise against the US dollar.Since the beginning of March 2026, the rupee has weakened by 266 paise, slipping from Rs 91.05 against the dollar at the end of Feb to 93.71 now.The decline is sharper over a longer horizon, with the currency down 386 paise since the start of 2026, from Rs 89.85 at the end of 2025. The slide is even more pronounced on a year-on-year basis, with the rupee depreciating by 826 paise since April 1, 2025; it stood at Rs 85.45 at the end of March 2025.Meanwhile, for crude oil, the median forecast of all analysts was $63.3 per barrel until Jan 2026, and the March-end exchange rate was estimated at Rs 90.8 against the dollar. The most extreme forecast for crude was $69 per barrel, while the most pessimistic exchange rate forecast was Rs 93 to the dollar. RBI analysis estimated that a $10 increase in crude oil slows GDP growth by 15 basis points and raises inflation by 20 basis points. According to Icra, a $10 per barrel increase in crude can raise the oil import bill by $13-14bn and widen CAD by 0.3% of GDP.