Increase in Crude Oil Prices Puts Pressure on Rupee

16-Jun-2025 12:30 PM

Mumbai. The ongoing conflict between Iran and Israel has led to a sharp rise in the international prices of crude oil, gold, and silver, which in turn has caused a significant fall in the exchange rate of the Indian rupee. This depreciation is expected to make imports more expensive and raise transportation costs within the country.

The Indian rupee weakened by 10 paise, bringing the value of 1 US dollar to ₹86.18 as of June 16, compared to Rs. 85.08 on June 13. Currencies of most other Asian countries also declined, while the US dollar index remained relatively stable.

Global crude oil prices have surged by over 12 percent in just the last three to four days due to the escalating Iran-Israel war. On June 16 alone, prices rose by approximately 5 percent. Israel has launched airstrikes targeting Iran’s nuclear facilities and oil refineries, significantly heightening tensions in West Asia and the Middle East.

Although India does not import oil directly from Iran due to US-imposed restrictions, the increase in global oil prices affects India indirectly through higher import costs from other suppliers. At 9 AM today, the price of Brent crude rose by 0.84 percent to $74.85 per barrel, and WTI crude increased by 1.03 percent to $73.73 per barrel.

Analysts warn that if the conflict continues, Brent crude prices could soon cross $100 per barrel, with a worst-case scenario of reaching $150 per barrel. Such a rise would be especially damaging for India, where food inflation has only recently been brought under control. Higher fuel prices would increase transportation costs, which could lead to a general rise in the prices of goods across sectors, potentially reversing the gains made in stabilizing inflation.