The domestic currency came under pressure after Brent crude surged above $100 a barrel, marking its first move past the level in nearly two months. Oil prices climbed about 7% on Thursday amid concerns over supply disruptions in the West Asia.
The latest rally followed reports that Yemen’s Houthi rebels attacked two Saudi oil tankers in the Red Sea, adding to existing concerns over disruptions to shipping through the Strait of Hormuz, a key global oil transit route.
Why higher oil prices hurt the rupee
India is the world’s third-largest importer of crude oil, making the economy highly sensitive to fluctuations in global oil prices.
A rise in crude prices increases India’s import bill, leading to higher demand for US dollars by oil marketing companies. This can widen the trade deficit and put downward pressure on the rupee.
The recent jump in oil prices has reversed the favourable trend seen just a few weeks ago. Brent crude was trading near $70 per barrel, helping the rupee recover towards the 94-per-dollar mark and improving expectations for the currency.
However, the renewed rally in crude has overshadowed the positive sentiment generated by the Reserve Bank of India’s recent measures aimed at attracting foreign capital inflows.
RBI likely to remain active
Market participants expect the Reserve Bank of India (RBI) to continue intervening in the foreign exchange market to limit excessive volatility.
The central bank has been actively selling dollars in recent sessions to cushion the rupee against oil-driven pressures, according to market participants. Traders expect the RBI to remain watchful to prevent the currency from slipping towards fresh record lows if pressure from higher crude prices persists.
What investors should watch
The rupee’s near-term direction will likely depend on whether crude oil prices remain elevated and how geopolitical tensions evolve. Alongside oil prices, foreign portfolio flows and any RBI intervention will remain key factors influencing the currency in the coming sessions.
-With Reuters inputs
First Published: Jul 24, 2026 9:17 AM IST
