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The Indian Rupee hit a record low against the United States Dollar on Wednesday after fresh upheaval between the United States and Iran caused panic in the financial markets across the globe.

In early trade the rupee was trading at about 85.60-85.80 per dollar due to traders reporting that the rupee was breaking its previous lowest possible value. The sudden drop came as a result of soaring crude oil prices, which hit over $90 per barrel on concern of a supply outage in the Strait of Hormuz.

In Indian equity, foreign institutional investors have gone ahead and kept selling money, thereby putting strains on the currency. RBI is also keeping a close watch on the situation and is likely to step into the forex market to bring down the extreme volatility in the market.

Economists cautioned that a prolonged high oil price had the potential to increase China’s current account deficit and to cause inflation. The government is reportedly reconsidering the actions it has taken to subsidize fuel in order to cushion the blow to the common people.

This is the second large rupee shock in 2026, which is associated with West Asian geopolitical shocks.