While Indian bourses may brace for some volatility, Israel’s response will determine the future course of action for investors.
Credit: Reuters File Photo
Bengaluru: Geopolitical worries tied to a fresh escalation in tensions between Israel and Iran over the weekend are expected to result in a flare up in oil prices in the coming week, according to market analysts who spoke to DH.
“Once Brent crude breaches the $95-97/per barrel mark following an escalation in the conflict, it may rise up to as much as $120 a barrel,” Sugandha Sachdeva, founder of SS WealthStreet, said.
With India’s heavy reliance on imports - to meet over 80 per cent of its crude oil requirements - a spike in prices, however short-lived, will directly impact the government’s finances and induce inflationary pressures, which in turn may impact the equity markets.
“We are definitely going to see an escalation in oil prices because Iran is one of the major producers of oil globally,” founder of Wright Research, Sonam Srivastava, said, adding that further implications may include supply chain disruptions and a negative impact on sectors which utilise oil as a raw material - chemicals, fertilisers, autos - besides the oil and gas sector itself, including oil marketing companies.
Iran, which blamed Israel and vowed revenge for the April 1 strike on its consulate in Damascus, on Saturday launched a retaliatory attack.
“The attack by Iran appears to have been an effort to show a strong response while minimising the risk of a much-wider escalation,” Deepak Jasani, who heads retail research at HDFC Securities, opined.
“While the global index futures are all down as of Sunday evening, unless we see fresh escalation of hostilities by either side (more so from Israel) by Monday morning, the global markets may take this in stride,” Jasani said, however, adding that for a sustainable bull run, more concrete evidence of lasting peace between the two parties and low probability of hostilities resuming in any form soon, will be required.
As of now, in light of positive factors such as a robust economy, India’s strong geopolitical relations and anticipation of interest rate cuts in the back half of the year, Indian bourses are not expected to experience any significant shifts, market experts said. Small corrections are however likely, they added.
Market analysts highlighted that while Indian bourses may brace for some volatility on Monday, Israel’s response will determine the future course of action for investors.
Gold may open higher on Monday morning as investors seek refuge in the safe haven asset, Sachdeva said. "However there is a crucial hurdle for the precious metal at $2,450/oz mark which could lead to some supply pressure," She added.
Sachdeva remains bullish on Indian markets until the general elections, following which some correction may be anticipated.
Furthermore, the fourth quarter earnings season is ongoing, wherein corporate giants such as Wipro, Infosys and Bajaj Auto are scheduled to report their financial results in the holiday-shortened week ahead. Stock markets will be closed on Wednesday on account of Ram Navami.