India is feeling the heat, following the US-Israel military action against Iran. The war has expectedly unsettled global markets.
The Indian rupee reportedly slid to its weakest level in a month (since early February) dropping 0.3% to 91.2350 against the dollar. The Nifty 50 and BSE Sensex both slid around 1% each.
Even government bonds came under pressure, with the yield on the 10-year benchmark note ticking up three basis points to 6.6901%. As experts noted, this is not just a market blip. It is a chain reaction with real consequences for ordinary Indians.
Oil is not well
The focus understandably is on the oil sector. In India’s context, the Middle East supplies India’s energy needs. When the Middle East sneezes, India catches pneumonia.
The Strait of Hormuz, through which roughly 20% of the world’s oil passes, is under threat. If this critical shipping corridor gets disrupted, crude oil prices could spike.
Higher oil means higher costs for almost everything: fuel, transport, manufacturing, and food.
For the stock market, the damage is not uniform. Sectors that are heavily dependent on fuel, airlines, paint companies, tyre makers, and logistics firms, will get impacted.
It is worth noting that India’s petrol and diesel prices still carry COVID-era tax buffers, which can delay the full impact on consumers until Brent crude sustains above $95 to $100 a barrel.
Until then, refining margins and marketing margins absorb the hit first. Aviation faces a double blow: higher jet fuel prices and disrupted airspace over parts of the Gulf are pushing costs up even as airlines struggle to raise ticket prices fast enough.
Tourism linked to GCC countries could also take a hit, as flight rerouting and security advisories may reduce inbound travellers. Hotel and hospitality stocks could see a sentiment-driven fall, even if actual demand holds.
Who benefits?
Not sectors are on a slippery slope. Defence manufacturers, energy companies and pharma sectors tend to hold up better during geopolitical stress. Gold and silver are already seeing increased safe-haven demand, as investors park money in traditional stores of value.
The rupee’s weakness adds another layer of trouble. A weaker rupee makes oil imports even more expensive, since crude is priced in dollars. This widens India’s current account deficit, the gap between what the country earns from exports versus what it spends on imports.
A wider deficit also increases pressure on the government’s finances, since fuel subsidies may have to rise to protect consumers from runaway prices at the pump. Experts have cautioned that if oil prices remain elevated, Indian government bonds, already under pressure, could face further stress.
On the stock market specifically, technical analysts are watching key levels closely. Markets had been expecting a big gap-down opening on Monday. If the Nifty 50 breaks below its immediate support at 24,850 to 24,800, the next crucial zone to watch is 24,500 to 24,400. Whether the index holds or breaks will depend on how long this conflict lasts and how high crude oil stays.
Wait and watch…
The big question hanging over everything is: how long will the disruption last? If crude oil stays elevated long enough, it will feed into inflation. The rupee will be under pressure. Experts believe the scenario might force the Reserve Bank of India to rethink its interest rate path.
A prolonged conflict near the Strait of Hormuz, which alone handles one-fifth of the world’s oil, would make all of this significantly worse. For now, Indian investors are in a wait-and-watch mode. At this point, they can’t do much else.
Also Read: ‘World Needs Peace’: Opposition Reacts To US-Israel Strikes On Iran https://www.vibesofindia.com/world-needs-peace-opposition-reacts-to-us-israel-strikes-on-iran/
