Higher crude oil prices are expected to pressure India’s economy and weigh on stocks, stoking inflation worries, straining the fiscal balance and the rupee, while pushing up import costs in the world’s third-largest oil importer.
Indian equities are set to fall sharply on Monday after oil prices surged about 26% in early trade to their highest since July 2022.
GIFT Nifty futures were at 23,760 at 8:00 a.m. IST, pointing to a 2.8% drop at the open for the Nifty 50 from Friday’s close of 24,450.45.
The widening US-Israeli war with Iran stoked fears of tighter supplies and prolonged disruption through the Strait of Hormuz, triggering a sell-off across global markets.
Other Asian stocks fell 4.8%, while Wall Street and European futures also slid, as the inflationary shock from surging crude prices threatened to harden or push up interest rates worldwide. Safe-haven demand kept the US dollar firm.
Indian shares log worst week in over a year as Mideast war lifts crude, dents risk appetite
Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocks shipments from the Middle East.
Brent crude jumped as much as 26.4% to $117.16 a barrel, and was up 25.5% at $116.4 by 8:00 a.m. IST.
On Monday, Iran named Mojtaba Khamenei as successor to his father Supreme Leader Ali Khamenei, signalling that hardliners remain firmly in control a week into the conflict with the United States and Israel.
Israel said it struck Iranian commanders in Beirut early on Sunday, widening its campaign after days of attacks that have killed nearly 400 people.
Even if the conflict eases soon, consumers and businesses globally could face weeks or months of elevated fuel prices because of damaged infrastructure, disrupted logistics and higher shipping risks.
The conflict has already dragged the Nifty 50 and Sensex to their worst weekly performance in more than a year, with both benchmarks losing about 2.9% last week.
“Escalating Middle East tensions are battering sentiment, with broad-based selling and risk aversion likely across sectors,” said Pravesh Gour, senior technical analyst at Swastika Investmart.
Persistent foreign investor outflows and a weakening rupee were compounding the pressure, Gour said.
Foreign institutional investors sold shares worth 60.30 billion rupees ($653.57 million) on Friday, while domestic investors bought 69.72 billion rupees, according to provisional NSE data.
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