US Treasury Secretary Scott Bessent announced an "economic D-Day" campaign to isolate Iran, threatening penalties against countries doing business with Tehran. The move impacts Iran's main trading partners, including China, Turkey, and India. Investors monitor Iran's response as the US plan aims to force capitulation despite prior US bombing that began in late February.

It remains unclear if the plan will loosen Tehran's stranglehold on the critical Strait of Hormuz. While oil prices initially fell following the US threat, the bigger risk for India is that any escalation sends crude higher, adding renewed pressure on the rupee. The rupee closed at about 95.74 per dollar on Monday, versus 95.79 on June 4, the day before the central bank unveiled special measures aimed at drawing more dollars into the country.

India has garnered over $65 billion through foreign currency deposits from its diaspora, data from the RBI showed on Saturday. Total inflows, including overseas foreign currency debt and external commercial borrowings, have reached $72.85 billion, helping the central bank build FX reserves. But the increase in reserves has trailed the headline inflow figures.

Through Aug. 14, there was a $21.5 billion gap between the dollars coming in and the amount added to reserves. Some of that money has gone toward settling the RBI's earlier forward-dollar sales and supporting the rupee. The currency remains under pressure as oil prices are elevated, and defending it too aggressively could erode the additional buffer.

Asian equities are lower in early Tuesday trading. Risk aversion could also weigh on Indian stocks, with the benchmark Nifty 50 already struggling for direction.