Indian rupee may breach 87-mark amid heightened global uncertainties

The war between Iran and Israel has taken a major turn after US President Donald Trump confirmed that American warplanes bombed three nuclear sites in Iran, including the Fordow uranium enrichment plant, a key part of Tehran’s atomic infrastructure buried deep within a mountainside near Qom. This marks the first time the United States has directly struck Iran’s nuclear facilities since hostilities began – a move certain to provoke serious retaliation from Tehran.

With tensions at a boiling point, attention now turns to the extensive network of US military bases and assets across the Middle East, many of which lie within striking distance of Iran or its proxy forces. These bases are now potential targets for Iranian missile, drone, or proxy attacks.

Since the start of this escalation, Brent crude oil prices have shot up sharply and remain on the higher side. Usually, the higher crude oil prices put pressure on the India’s inflation and demand for dollars from oil importers increases leading to falling domestic currency.

India, which imports over 85 percent of its energy needs, faces heightened macroeconomic vulnerability from rising oil prices. A $10 per barrel increase in crude could widen the country’s current account deficit by 0.3 percent of GDP and exert upward pressure on inflation.

Going ahead, Parmar said that going ahead, In addition to geopolitical tensions, short-term movements in the Rupee will be significantly influenced by foreign investment flows.