India’s equity and bullion markets could get caught in the crossfire between Israel and Iran on fears of the ongoing tensions escalating into a full fledged war.
“The current conflict between Israel and Iran will have repercussions on the Indian market and may result in a knee jerk reaction among market participants. Rising tensions could have a bearing on crude oil prices. Every one dollar rise in crude will impact the Indian economy and impose inflationary pressure. We need to see whether the conflict escalates further or the countries try to diffuse the situation through diplomatic means,” said Kranthi Bathini, director - equity strategy, WealthMills Securities.
India’s equity markets have already been under pressure due to fading expectations for significant Federal Reserve interest rate cuts this year following the US’ March inflation print. This could get exacerbated with Iran launching a wave of drone and missile attack on Israel in retaliation against the April 1 air strike on the Iranian embassy compound in Damascus.
“If this remains a “we’re done now” rather than escalating , focus will be back on corporate earnings and the US Fed outlook . If Israel further escalates or Iran does another round of attacks, the markets will be in Risk Off mode. Precious metals and safe haven currencies as well as crude oil will go up while risk assets will see a sell off, “ said Ajay Bagga, a market expert, on platform X
Equity markets could see a correction this week if oil prices react to the conflict in the West Asian region. Analysts are expecting oil prices to inch up higher on Monday. The international benchmark (Brent) prices have already appreciated by 10 per cent to hit $90 a barrel in the last one month.
An official with a domestic refiner said that already the geopolitical tensions, demand outlook and supply dynamics along with OPEC+ production cuts supported Brent’s rally at $90 per barrel. Israel’s attack on Iran lifted prices to over $92, the highest since October 2023.
In the bullion market, gold prices are expected to rise further. Suvankar Sen, MD & CEO, Senco Gold & Diamonds said though every effort is being made to soothe the nerves, gold prices will move up if the Iran-Iraq war escalates further as it is considered the best hedge during uncertain times.
Ajay Kumar, Director, Kedia Commodities said gold prices will turn volatile and may swing by $100-200 an ounce as it was seen in previous occasions during earlier conflicts between Russia-Ukraine and Israel-Palestine.
Investors should be very cautious while trading in the yellow metals since the prices are already at record high and there is no certainty prices will stay higher even if it goes up after the knee-jerk reaction, he added.
(With inputs from Rishi Ranjan Kala in New Delhi)