MUMBAI: The rupee sank to a new low of 94.28 Friday, down 30 paise from the previous close, as risk aversion along with dollar demand from importers mounted due to lack of clarity on the talks that the US is claiming to be holding with Iran which though arrested a surge in in oil prices but still holding above $100 a barrel level.
That crude is trading above $100 a barrel is surprising as US president Donald Trump has extended his threat to blow up Iran’s power and other energy infrastructure by another 10 days to April 6 although Iran has rejected his ceasefire proposal saying the deal was “one-sided” and that any de-escalation has to be under its own terms and conditions and not that of the aggressor.
The market mayhem continued today even after the government announced a steep Rs 10/liter cut in excise duty on petrol and diesel effective immediately.
The main stock indices are down over 1.7% each after two days of rally wherein they had gained 3.5% each.
The rupee has depreciated more than 4% since the start of the Iran war, which is showing little signs of abating despite the US’ claims of two sides working on a peace deal. The currency is down close to 10% in fiscal 2026. The rupee had sunk to 94.05 on Wednesday in intra-day trade.
The pause in hostilities has not done much to prop up investor sentiment. Bond yields edge up to 6.855% today while Brent crude was trading above $107 a barrel. The prices have stayed above $100 for most days after the breakout of conflict, barring a brief respite after Trump’s first announcement for delaying power plant strikes. Since the war began crude prices have surged over 45% while gas prices rose more than 50%.
Rising crude prices pose serious threat to a net oil importer like India which meets as much as 85% of its oil needs. The close 45% spike in energy prices can lead to imported inflation leading to a spike in every other sector of the economy. This can upset many fiscal maths of the government such as wider fiscal deficit, deeper current account deficit, and higher subsidy bills among others.
