Indian Rupee Plunges Over 7% Amid Global Shocks and Oil Price Volatility

The Indian Rupee has faced its most brutal six-month stretch in years due to a perfect storm of global shocks. The currency's value plummeted over 7% against the US Dollar year-to-date, trading above 96.00 and nearing its all-time low of around 97.10.

The sharp depreciation was triggered by various factors, including surging Oil prices, which rose significantly in the first half of the year due to the Middle East crisis. The WTI Oil price surged over 70% in less than two weeks to near $113.30 since the official war confirmation between the US and Iran.

The closure of the Strait of Hormuz amid the war disrupted energy supply from the Middle East, leading to a boost in India's import bill by 60% to $49.8 billion in the first quarter of fiscal year 2027. As India meets 85% of its energy requirements through imports, elevated Oil prices forced the country to spend heavily on foreign exchange, driving down the value of the local currency.

The US-India trade uncertainty also weighed on the Indian Rupee, with fears of prolonged trade tensions between the two nations. However, a bilateral trade pact was signed in February, slashing tariffs on imports from New Delhi to 18% from 50%, but its impact has already been discounted.