Forex Storm Over Asia: India’s Reserves Sink As Iran Conflict Sends Shockwaves Across Markets

Nikunj Parikh May 14, 2026 420 Views

India’s foreign exchange reserves have fallen sharply since the escalation of the US-Iran conflict, making Asian economies among the biggest financial casualties of rising oil prices and currency instability. Surging crude costs, weakening regional currencies, and capital outflows are intensifying pressure on reserve buffers, especially in oil-import-dependent economies like India, the Philippines, and Indonesia.

The economic fallout of the escalating Middle East crisis is increasingly visible across Asia’s financial markets. India, heavily reliant on imported energy, is facing mounting stress as foreign exchange reserves decline and the rupee touches record lows against the US dollar.

India’s Forex Cushion Takes A Heavy Hit

According to recent reports, India’s forex reserves have dropped significantly since tensions intensified around the US-Iran conflict and disruptions in the Strait of Hormuz. Analysts estimate that the Reserve Bank of India has spent billions of dollars defending the rupee while managing rising import costs.

The rupee recently weakened to a record low near 96 per US dollar as crude oil prices surged and foreign investors pulled money from Indian markets. Reuters reported that more than $20 billion in foreign portfolio investments have exited India since the conflict escalated.

Oil Prices Become Asia’s Biggest Threat

Asian economies are facing severe pressure because nearly 84% of crude oil moving through the Strait of Hormuz is destined for Asia. India, South Korea, Japan, and China remain highly exposed to supply disruptions and energy inflation.

The International Monetary Fund has warned that rising commodity prices and tighter financial conditions linked to the Middle East war could weaken global growth and increase inflationary risks.

Currency And Market Pressure Intensify

India’s central bank has responded with currency interventions, import management measures, and emergency economic strategies to contain volatility. Meanwhile, Asian currencies including the Indian rupee, Indonesian rupiah, and Philippine peso continue to remain under pressure amid safe-haven demand for the US dollar.

Market Shock Highlights

India’s forex reserves have seen a major decline since the US-Iran conflict escalated
The rupee touched record lows amid oil price and capital flow pressures
Asian economies remain the biggest victims of Strait of Hormuz disruptions
Over $20 billion reportedly exited Indian equity markets
Central banks across Asia are intervening to stabilize currencies