The Indian rupee dropped to an all-time low on Friday, extending its decline as global energy supply disruptions stemming from the conflict in the Middle East pose a significant threat to the nation’s economic stability. The currency touched 92.92 against the US dollar, surpassing its previous record low of 92.63 reached earlier in the week. This depreciation highlights growing concerns about the impact of rising oil prices on India’s third-largest economy, which relies heavily on imports.

Oil prices had climbed sharply to nearly $120 a barrel on Thursday, a surge triggered by attacks on critical energy infrastructure in the Gulf region, although they saw a slight recovery on Friday. Major European nations and Japan have stepped forward to offer assistance in ensuring safe passage for shipping through the vital Strait of Hormuz. Meanwhile, the United States has indicated plans to increase its oil supply to help stabilize global markets.

The pressure on the rupee is expected to persist in the short term, as anxieties over the oil price shock have prompted a significant outflow of foreign capital. Investors have withdrawn over $8 billion from Indian stocks in March alone, marking the largest monthly exodus since January 2025. This capital flight further weakens the rupee and complicates economic management.

Economists warn that a prolonged period of elevated energy prices could have a dual negative effect on India’s economy. Such a scenario would likely dampen economic growth prospects, while simultaneously pushing inflation higher. This presents a challenging dilemma for policymakers attempting to balance growth stimulation with price stability.

The ongoing geopolitical instability in the Middle East continues to cast a shadow over the global economy, with emerging markets like India particularly vulnerable to fluctuations in energy prices and investor sentiment. The coming weeks will be crucial in observing how international efforts to de-escalate tensions and secure energy supplies impact the rupee and the broader Indian economic outlook.