Rupee Hits 8-Week Low Sharply vs US Dollar Amid Israel-Iran Tension, Crude Oil Surge & Stock Market Jitters

Israel Attack on Iran Impact: The Indian rupee opened significantly weaker on Friday, plunging by 55 paise to 86.1537 against the US dollar, breaching the crucial 86-mark for the first time in recent sessions. The sharp decline was directly linked to escalating geopolitical tensions and a surge in global oil prices. The fall followed fresh Israeli airstrikes on Iran's nuclear facilities, which rattled global markets.

The rupee had closed at 85.52 on Thursday, June 12 and opened at 86.25 at the interbank foreign exchange market before recovering slightly to 86.08. A weak start in domestic equity markets and sustained foreign institutional investor (FII) outflows also weighed on the Indian currency, according to forex traders.

"Operation Rising Lion": Israel Launches Airstrikes on Iran

Israel launched a military operation late Thursday night, code-named "Operation Rising Lion," targeting key nuclear and missile facilities in Tehran and surrounding areas. Israeli Prime Minister Benjamin Netanyahu described the campaign as essential to the nation's "very survival." Explosions were reported across Iran's capital, with state-run media confirming the attacks.

In response to global market concerns, US Secretary of State Marco Rubio clarified that the United States had no involvement in the strikes. He emphasised that Israel acted independently, even as the US continues to pursue nuclear negotiations with Iran.

Israel Iran Conflict: Impact on Stock Market, Crude Oil and US Dollar

The geopolitical turmoil quickly impacted global commodity and currency markets:

The US dollar index, which measures the greenback against six major currencies, rose by 0.31% to 98.22, reflecting investor demand for safe-haven assets. Meanwhile, Brent crude oil futures jumped 8.59% to $75.32 per barrel, reacting to potential disruptions in Middle East supply chains.

The US dollar index rose sharply from 96.921 to 98.201 reflecting a flight to safety and further pressuring emerging market currencies like the rupee.

Air India Crash Impact on Share Market

Weak domestic equities added to pressure investor sentiment was also shaken by a tragic Air India crash on Thursday. A London-bound flight carrying 242 passengers and crew crashed into a medical college complex in Ahmedabad, killing at least 265 people including several on the ground. It is being termed India's worst aviation disaster in recent times.

Technical View: Rupee at Key Resistance Levels

"The Indian rupee weakened to an eight-week low of 86.17 on Friday amid intensifying geopolitical tensions and renewed trade uncertainty. Israel's airstrikes on Iran pushed oil prices up nearly 10%, stoking concerns over India's trade deficit. Meanwhile, U.S. President Trump threatened unilateral tariffs but allowed room for deadline extensions, adding to global market jitters. Some support for the rupee came from constructive U.S.-India trade talks. On the domestic front, easing inflation-falling to 2.82% in May-offered relief, nearing the RBI's lower tolerance limit and potentially reducing rate hike pressures," said Ajay Kedia, Director of Kedia Advisory.

Rupee Outlook: More Pressure Ahead for Indian Rupee

The rupee is likely to remain under pressure in the near term as investors react to rising crude prices and geopolitical uncertainty. A deeper conflict could lead to further capital outflows and continued strengthening of the US dollar, putting additional strain on emerging markets. Traders and investors will watch closely for RBI actions, diplomatic moves and oil price fluctuations to assess the rupee's future trajectory.

Experts attribute the rupee's drop to 86.17, its lowest level in eight weeks to a combination of rising oil prices following Israel's strikes on Iran and growing global trade uncertainty after Donald Trump hinted at a tougher trade stance. While these factors have hurt India's trade outlook, some relief came from signs of limited but positive progress in U.S. and India trade talks with a sharper-than-expected drop in India's inflation to 2.82% in May.

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