The sharp escalation of conflict in the Middle East has led the rupee to tumble to a record low on Friday, breaching the 94-per-dollar mark and threatening to head to the 95 levels.

The Indian currency is set for its worst fiscal-year performance in over a decade as it is pressured by sustained foreign fund outflows and a weakening in the domestic equity markets. This spiral chain has been aggravated by a widening conflict in the Gulf region with the US-Iran war intensifying and putting oil prices on a steep upward curve.

The rupee tanked to an all-time low to close at 94.84 against the US dollar on Friday, shedding 0.9% amid a stronger greenback. After the outbreak of the US-Israel war against Iran, the Indian currency has depreciated nearly 4% and its fall in the current fiscal has been around 11%. 

The rupee had last witnessed a sharper fall in 2011-12, depreciating nearly 14% amid the eurozone debt crisis, a widening current account deficit and weak capital inflows.

Supply restrictions have pushed oil prices above $100 per barrel since the war broke out. On Friday, brent crude, the global oil benchmark, was trading at $109.8 per barrel, up 0.53%, in futures trade.

The rupee will continue to stay vulnerable if the oil prices rise.

India’s foreign exchange reserves, which peaked at an all-time high of $728.494 billion in late February, has seen a sharp decline since the war tensions started. For the week ended 20 March, forex reserves fell by $11.413 billion to $698.346 billion. The previous week’s drop was by $7.052 billion.