Indian Shares Set To Extend Losses As Middle East War Escalates

Indian shares look set to open sharply lower on Wednesday as the U.S-Israeli war against Iran escalated into a regional conflict, leading to airstrikes and retaliatory attacks, straining diplomatic relations and resulting in hundreds of casualties, including both military and civilian deaths.

With Tehran retaliating by closing the Strait of Hormuz and targeting U.S. bases in other countries in the West Asian region, and Washinton warning that ‘harder hits’ are still to come, there is no clarity on the conflict’s duration and potential outcomes.

As the conflict threatens global fuel trade, U.S. President Donald Trump said the U.S. Navy ‘will begin escorting’ oil tankers through the Strait of Hormuz, a strategic waterway, if necessary.

Trump also said he had instructed officials to provide political risk insurance and financial guarantees at a reasonable cost to secure maritime trade passing through the Gulf, particularly energy shipments.

Indian stock markets were closed on Tuesday on account of Holi.

Benchmark indexes Sensex and Nifty tumbled by 1.3 percent and 1.2 percent, respectively on Monday as the possibility of prolonged turmoil in the Middle East and the ripple effects of higher oil prices spooked investors.

The Indian rupee fell past 91 per dollar for the first time in a month due to concerns about imported inflation and continued foreign institutional investor outflows amid heightened geopolitical uncertainty.

In a social media post, Minister of Petroleum and Natural Gas, Hardeep Singh Puri, has said that the government is continuously monitoring the evolving situation in West Asia and will take all necessary steps to ensure the availability and affordability of major petroleum products in the country.

India imports nearly 85 percent of its crude oil needs and therefore a sharp surge in crude prices to their highest level in four years reignited investor concerns over inflation and India’s external balances.

Foreign investors net sold shares worth Rs 3,296 crore on Monday, while domestic institutional investors net bought shares to the extent of Rs 8,594 crore, according to provisional exchange data.

Asian markets traded lower for a third day running, with South Korea’s Kospi falling nearly 6 percent and Japan’s Nikkei average tumbling over 3 percent, as the conflict in the Middle East continued to fuel uncertainty.

Both Brent crude and U.S. West Texas Intermediate crude contracts steadied in Asian trade after finishing Tuesday’s session 4.5 percent higher.

Oil and gas flows through the Strait of Hormuz, a narrow waterway between Iran and the United Arab Emirates (UAE), has almost entirely halted following Iran’s threats to “set fire” to ships.

It is feared that a sustained energy shock could cause inflation to flare back up, complicating the Federal Reserve’s anticipated interest rate cuts.

The dollar surged to a three-month peak while gold surged nearly 2 percent toward $5,200 an ounce after drifting lower in the previous session, weighed by a stronger dollar and dimming prospects for Federal Reserve rate cuts.

Overnight, U.S. stocks trimmed early losses but still ended notably lower as Israel and the U.S. pounded Iran and Tehran pressed ahead with retaliatory attacks, raising concerns the Middle East conflict could disrupt global trade and reignite inflationary pressures.

As oil prices surge to their highest levels in over a year, President Trump stressed that the United States would ensure the “free flow of energy to the world” under any circumstances.

The Dow closed 0.8 percent lower at a one-month low after having plummeted by more than 1,200 points to its lowest intraday level in almost three months in intraday trading. The tech-heavy Nasdaq Composite shed 1 percent and the S&P 500 gave up 0.9 percent.

European stocks ended with sharp losses to hit multi-month lows on Tuesday as the Middle East conflict widened, and data showed Eurozone inflation unexpectedly rose in February.

The pan European Stoxx 600 slumped 3.1 percent. The German DAX plummeted 3.4 percent, France’s CAC 40 plunged 3.5 percent and the U.K.’s FTSE 100 tumbled 2.8 percent.