The ongoing conflict in Iran has yet to significantly impact India’s domestic consumers, as the government has maintained retail petrol and diesel prices. While concerns have emerged around the availability of liquefied petroleum gas (LPG) and pressures on certain business sectors, many retail consumers continue to experience relative stability. However, two groups have already encountered financial strain: investors holding domestic stocks or mutual funds, and those facing expenses denominated in foreign currencies. Individuals exposed to both risks have faced compounded challenges.

Stock markets have registered declines amid the geopolitical uncertainty, while the depreciation of the Indian rupee against the US dollar has increased the cost of foreign currency obligations. For example, parents funding overseas education in US dollars have seen the rupee equivalent of tuition fees rise from approximately ₹85 lakh to ₹94 lakh over the past year. While rupee depreciation stems from multiple factors beyond the Iran war, the immediate budgetary impact on such households is unmistakable.

Analysts advise that no investment strategy can fully shield portfolios from low-probability, high-impact events such as geopolitical conflicts. Nonetheless, the uneven effects of global crises mean that diversifying beyond Indian assets may help mitigate risks. India’s heavy reliance on imported crude oil makes its economy and currency more vulnerable to turmoil in West Asia, often resulting in greater volatility for domestic stock markets during such episodes.

Investors are encouraged to allocate a meaningful portion of their portfolios—experts suggest at least 25%—to assets not closely correlated with the Indian economy. Foreign equities and precious metals like gold and silver can serve as effective hedges. Unlike domestic equities, foreign stocks are influenced by different economic conditions. Meanwhile, gold and silver, traded globally, tend to adjust more swiftly to currency fluctuations, offering potential protection against rupee depreciation.

Performance data from 2026 illustrates this disparity. While the Nifty 50 index has declined approximately 8.5% in rupee terms since January, major international benchmarks such as the S&P 500 and the MSCI All Country World Index have gained 4.7% and 6.4% respectively in dollar terms, with gold appreciating nearly 9%. Factoring in a 4.6% depreciation of the rupee against the dollar this year, Indian investors in foreign assets have experienced combined returns from both asset appreciation and currency gains. Over a five-year horizon, the Nifty 100’s annualized return of 10.5% was offset by the rupee’s yearly depreciation of 4.7% against the dollar. In contrast, foreign equities and gold posted strong dollar-denominated compound annual growth rates, highlighting the benefits of international diversification.

Various routes exist for Indian investors seeking foreign exposure, including investments in foreign equity funds domiciled in India, funds available through the Gujarat International Finance Tec-City (GIFT City), or utilizing the Liberalised Remittance Scheme (LRS). It is important for investors holding overseas assets to comply with income tax disclosure requirements.

While some may argue that diversifying abroad may not always outperform domestic investments or that rupee fluctuations could reverse, diversification is principally aimed at reducing vulnerability to adverse outcomes rather than capturing the highest returns at all times. Spreading investments across multiple markets and asset classes is a strategic approach to manage country and currency risk in increasingly interconnected global markets.