Summary of this article
Rupee could remain under pressure during Iran war despite RBI's best efforts
Rupee could touch 100 to a dollar mark the near term if the war persists
The rupee could weaken past the 100 to-a-dollar mark if the US-Iran war drags on, experts have said, adding that the Reserve Bank of India’s (RBI’s) efforts to counter the fall could only provide a temporary relief.
Brent crude oil prices, which have surged over 40 per cent since the war began, will remain elevated if the war continues, accelerating the rupee’s depreciation and further clouding inflation and fiscal deficit targets, Fargo and Van Eck Associates Corp told Bloomberg. The rupee has continued as Asia’s worst performing currency since 2025, plunging nearly 10 per cent in the past year, with its value dropping 5 per cent this year alone.
The RBI has undertaken a series of measures to limit the volatility in the rupee. Persistent interventions in the foreign exchange market, with the RBI selling dollars, has depleted its foreign exchange reserves to less than $700 billion, with over $11 billion eroded in the week ending March 20, 2026 alone.
The RBI also recently took a bold step with the rupee in focus, by capping net open forward rupee positions of Indian banks to $100 million. The limit will force banks to cap their books and reduce their ability to run one-sided bets against the rupee.
While the move is expected to provide some relief to the rupee, it will also trigger sudden unwinding of arbitrage bets on the rupee, and could also lead to some foreign investors exiting the already volatile market.
Experts say that sales by foreign portfolio investors (FPIs), which have rattled domestic markets, will continue to put pressure on the rupee as long as the war continues. This, added to the already elevated crude oil prices, will continue to pull the rupee down, with most expecting the rupee to touch 100 against the dollar by June if the war continues.
“100 per dollar is no longer a tail risk — it is a credible stress scenario if current conditions persist…The latest measures look more like short-term stabilisation tools than a structural solution,” Ahmed Azzam, head of financial market research at broker Equiti Group told Bloomberg.
Investors are hoping that the war could be nearing its end after US President Donald Trump said he expects the war to wrap up within 2-3 weeks. However, without a certain and conclusive end to the war from both the parties, investors will continue to remain risk averse towards emerging markets, such as India.
