The Indian rupee has depreciated 5 paise to 96.41 against the US dollar in early trade on Tuesday. The currency had closed at 36.36 against the US dollar in the previous market session on Monday.
The rupee slipped past 96.50 in the previous session for the first time in two months before a recovery.
The currency has come under pressure over the past two weeks following the resumption of hostilities between Iran and the United States, driving up oil prices.
The currency's outlook has deteriorated in recent weeks, fuelled by the rally in crude oil prices. Brent crude prices jumped to $91 a barrel on Monday before pulling back to around $88.50.
Despite the pullback in prices, the flow disruption remains a cause of worry for the investors.
Yemen's Iran-aligned Houthis said they would impose a naval blockade on Saudi Arabia, potentially opening a new front in the conflict with the US and increasing risks to energy supplies.
Meanwhile, a positive shift towards the rupee is expected to support the domestic currency as investors remain firm despite incurring some losses in the previous sessions.
The rupee's weakening position is primarily driven by four major factors: a rise in crude oil prices; a strengthening US dollar; high-yielding US Treasury bonds; along with trade tariffs, which put an additional burden on the country's import bill.
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