Prior to March 15, 2025, expectations for the Indian Rupee (INR) were relatively stable, with the USD/INR exchange rate holding below the critical 94-per-dollar mark. However, this stability was disrupted by escalating geopolitical tensions in the Middle East, which led to significant foreign capital outflows.

On March 15, 2025, the Indian Rupee breached the 94-per-dollar mark for the first time, with the USD/INR pair reaching 85.47 during trading. This marked a decisive moment in the currency’s trajectory, reflecting a depreciation attributed to the ongoing Iran war and its implications for global oil prices.

The immediate effects of this depreciation were felt across various sectors. The Reserve Bank of India intervened in currency markets to stabilize the situation, but the rupee had already fallen about 3% since the onset of the conflict. Additionally, foreign institutional investors sold equities worth Rs 5,518.39 crore on a net basis on the same day, indicating a loss of confidence in the Indian market.

India’s forex reserves also took a hit, decreasing by $7.052 billion to $709.759 billion in the week ending March 13, 2025. The Sensex, a key indicator of market performance, crashed 1,836.57 points, or 2.46%, to 72,696.39, reflecting widespread investor panic.

Brent crude futures spiked above $105 per barrel, inflating India’s import bill, as the country imports approximately 85% of its crude oil from the affected regions in the Middle East. This surge in oil prices further compounded the pressures on the rupee.

Experts have weighed in on the situation, with Anuj Choudhary stating, “We expect the rupee to trade with a negative bias as deteriorating global sentiments and geopolitical tensions may keep the rupee under pressure.” Similarly, a report from Standard Chartered highlighted that the Indian Rupee faces triple pressure from geopolitics, commodities, and capital flows.

In this environment, the dollar has emerged as a safe haven, with the dollar index rising about 0.3% to 99.9. ING noted, “This is an ideal environment for the dollar, especially against higher beta currencies,” further emphasizing the challenges facing the rupee.

As the situation develops, the Reserve Bank of India is expected to employ multiple policy tools to mitigate the impact of these external pressures. However, the path forward remains uncertain, and details remain unconfirmed.

Looking ahead, the USD/INR pair surged to 94.40 during trading on October 9, 2025, indicating that the volatility in the exchange rate may persist as geopolitical and economic factors continue to evolve.

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