The Indian rupee, which had been recovering some ground against the US dollar over the past week, dropped nearly 17 paise to 95.35 in early trade on Monday.
According to interbank exchange rates, the rupee was trading 17 paise lower compared to its previous close.
The fresh decline comes amid renewed military escalations between Iran and Israel, which have triggered uncertainty over possible disruptions to crude oil supplies.
This has also contributed to a sharp fall in Indian stock markets, with the BSE Sensex and NSE Nifty 50 collectively losing over 1,000 points in early trade.
The domestic currency is facing heavy depreciation pressure due to rising crude prices.
The international benchmark Brent crude was trading 3.5 per cent higher at around $97 a barrel following the latest missile strikes in the Middle East.
Growing expectations that the US Federal Reserve might raise interest rates have further bolstered the US dollar.
Since the escalations in the Middle East began on February 28 this year, Asian stock markets and currencies have come under significant strain due to disruptions in crude oil supplies caused by tensions around the Strait of Hormuz.
Asian currencies, including those of Japan, South Korea, Indonesia and India, have witnessed declines ranging between 3 per cent and 8 per cent during this period.
Also read: Sensex tanks 835 points, Nifty down 248 points in early trade
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