The Indian rupee could weaken to 98 a dollar by the year-end even if a lengthy war in West Asia is avoided, analysts at brokerage firm Bernstein cautioned, highlighting the country’s vulnerability to shocks stemming from a sharp rise in energy ‌prices.

The firm’s base case is for hostilities in West Asia to conclude within a month, while its bear case bakes in the war extending for a year.

If the conflict lasts much of 2026, “the repercussions could be catastrophic”, Bernstein analysts Venugopal Garre and Nikhil Arela said in a note on Wednesday, citing supply risks, double-digit inflation and economic growth in the 2-3 per cent range.

The base case would leave India’s benchmark Nifty 50 index at around 26000 by year-end, a 2 per cent cut from Bernstein’s earlier target.

The bearish scenario, meanwhile, could push the index below the 20000 mark and weaken the rupee beyond 110 to the dollar, which
would be about 17 per cent weaker than current levels of near 94.

The Indian currency closed Wednesday with another record low of 93.98 a dollar, depreciating by 22 paise.

During the day, the rupee touched a low of 94.05 against the greenback.

Even if a lengthy conflict is avoided, Bernstein sees a realistic chance of the rupee breaching 98 per dollar this year, with pressure primarily stemming from India’s current account balance, which for the final quarter of FY26 is expected to be in a deficit, Reuters reported.

The brokerage highlighted that India’s strong economic performance in recent years has been closely linked to relatively low crude prices. Between 2014 and 2021, crude largely remained below $80 per barrel, with only brief spikes.

Even during the Russia-Ukraine conflict, crude stayed above $100 only for a limited period before declining.

This, Bernstein said, underscores India’s vulnerability to external shocks, particularly through crude prices and external financing conditions.

The report added that these risks become significant only if the current shock persists and evolves into what it described as a “GFC moment”.

It said that while wars eventually end and markets recover, such episodes
expose underlying external vulnerabilities that can have lasting macroeconomic implications.

“One thing ‌looks increasingly possible: if the crude levels sustain even in April, India will see its first real test in (the) last 12-13 years,” the note said, according to Reuters.

The worst-case scenario, according to Bernstein, would resemble India’s experience after the Great Financial Crisis of 2008 which led to a sharp cut in India’s economic growth, sent inflation soaring and sparked a sharp depreciation in the local currency.