Investing.com– The Indian rupee hit a record low on Monday, extending its recent downturn against the dollar amid rising oil prices and fears of more supply disruptions stemming from the U.S.-Israel war on Iran.
The rupee’s pair, which gauges the number of rupees needed to buy one dollar, rose as high as 92.711 rupees on Monday.
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Weakness in the rupee was driven chiefly by heightened concerns over India’s oil and gas supplies, after Iran effectively blocked the Strait of Hormuz earlier this month.
The waterway supplies roughly 20% of the world’s oil consumption, and is also a key channel for Indian oil and gas imports.
The country imports roughly 80% of its overall oil and gas consumption, leaving it heavily dependent on energy imports and vulnerable to any supply disruptions.
Higher oil prices also mean that Indian importers have to pay more for oil imports– a trend that weighs on the rupee.
India had halted oil purchases from Iran in 2019 to comply with U.S. sanctions against Tehran. While the country has diversified its energy imports to Russia, Saudi Arabia, and the United Arab Emirates, a bulk of its energy still flows through the Strait of Hormuz.
ANZ analysts warned in a note last week that persistent energy supply disruptions stood to hurt India’s economy, and were also likely to keep the rupee volatile.
