Mumbai | June 23, 2025 — The Indian rupee plunged 23 paise to close at a five-month low of 86.78 against the U.S. dollar on Monday, rattled by intensifying geopolitical tensions in the Middle East and volatile global crude oil prices.

Forex traders cited heightened uncertainty following the United States' airstrikes on three nuclear facilities in Iran, which triggered a jump in crude oil prices and a flight to the safety of the U.S. dollar.

Intraday Volatility: From 86.75 to 86.85

The rupee opened at 86.75 and witnessed significant fluctuations, touching an intraday high of 86.67 and a low of 86.85 at the interbank foreign exchange market, before settling at 86.78, down from 86.55 on Friday.

This is the weakest level of the Indian currency since January 13, 2025, when it had closed at 86.70.

"Higher oil prices in early trade pushed the rupee down to 86.85, but as oil eased, importers seized the chance to hedge," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

However, the rupee’s recovery was short-lived, as heavy demand for dollars from oil importers and risk aversion led it to fall back. Mr. Bhansali added that RBI intervention around 85.82 kept the rupee from breaching further downward levels.

Crude Oil and Dollar Index Pressures

The geopolitical standoff in the Middle East has spooked energy markets, with Brent crude prices rising to $77.07 per barrel — up 0.08% in futures trading.

A stronger U.S. dollar index, which rose 0.60% to 99.29, also made emerging market currencies like the rupee less attractive.

"The rupee is caught between two forces — strong dollar momentum amid geopolitical safe haven buying and India’s own resilient FII inflows," said Poonam Sharma, Senior Currency Strategist at a Mumbai-based foreign bank.

Stock Market Slump Adds to Pressure

Domestic equity markets reflected the global nervousness. The BSE Sensex tanked 511.38 points to close at 81,896.79, while the NSE Nifty fell 140.50 points to 24,971.90.

Tech, FMCG, and financial stocks bore the brunt of the sell-off, with Infosys, HCL Tech, Bajaj Finance, and Hindustan Unilever among the top laggards.

FII Inflows and Forex Reserve Gains Limit Rupee Slide

Despite the currency market volatility, foreign institutional investors (FIIs) remained net buyers, pumping in ₹7,940.70 crore in Indian equities on Friday, as per NSE data.

Also cushioning the rupee’s fall was India’s rising forex reserve buffer, which surged by $2.294 billion to touch $698.95 billion in the week ending June 13, 2025, according to the Reserve Bank of India (RBI).

"This strong reserve position gives the RBI enough ammunition to smoothen volatility," said Sharma. "We have seen the RBI selling dollars to prevent disorderly movement."

Global Risk-Off Mood Prevails

The combination of escalating conflict between Israel, Iran and U.S. military involvement, along with the possibility of disruptions in the Strait of Hormuz, has ignited fears of a global supply shock.

Even as experts downplayed the likelihood of a full blockade, markets remained jittery.

"The Strait of Hormuz closure remains a threat rather than a certainty, but it keeps risk premium high in oil," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Asian markets also slipped on Monday:

• Nikkei 225: Down

• Kospi (South Korea): Down

• Hang Seng (Hong Kong): Down

• Shanghai Composite: Marginally up

Meanwhile, U.S. indices had closed mostly lower on Friday, setting the tone for weakness.

Outlook: Range-Bound With Downside Risks

Currency analysts expect the rupee to trade in a narrow band of 86.50–86.90 in the coming days, depending on crude oil trends and global risk sentiment.

“We’re in a fragile zone. If crude prices cross $80 again, expect further weakness in the rupee unless RBI steps in aggressively,” said Rajesh Tiwari, Head of FX Research at Axis Securities.

Technically, the next resistance is seen at 87.00, while support lies near 86.50. A break below that could lead to a temporary strengthening phase if oil stabilizes or dollar weakens post-diplomatic developments.

Conclusion

With crude oil prices elevated, Middle East tensions high, and the dollar rallying, the rupee’s immediate outlook remains cautious. However, India’s solid forex reserves and active central bank intervention may help cushion any sharp decline.

Investors, importers, and businesses must brace for continued volatility, as geopolitical uncertainties dominate market sentiment.

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