Brent Crude prices have jumped nearly 2% following the latest reports on escalation of the West Asia war.
As per agencies a drone strike is the reason for the massive fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia has reportedly stated the interception of three drones. These developments come after US President Donald Trump warned Iran and said Iran must act ‘fast’ to end the US-Israel war on Iran.
“Global risk appetite weakened sharply after fresh escalation fears emerged in the Middle East. US President Donald Trump’s warning urging Iran to get moving, fast has once again revived concerns around a possible disruption in global crude oil supply routes, particularly around the Strait of Hormuz” Hariprasad K, Research Analyst and Founder, Livelong Wealth told PTI.
For Indian stock markets, the most crucial concern continues to remain elevated oil prices and the rupee hitting an all-time low consistently. Foreign Institutional Investors bought equities worth Rs 1,329.17 crore on Friday, according to exchange data. “US President Donald Trump issued a fresh warning stating that the ‘clock is ticking for Iran’, signaling growing impatience over the pace of negotiations and increasing uncertainty surrounding the ongoing US-Iran situation and the Strait of Hormuz. This continues to remain a key overhang for global financial markets” Ponmudi R, CEO of Enrich Money, an online trading and wealth-tech firm, told PTI.
As the spotlight continues to be on the oil market and the rates going forward amid escalating geopolitical concerns, the bigger question is also on the uptick in inflation, fuel rates and global economic growth. India imports over 85-90% of its crude needs and the spike in oil rates will further hurt and widen the trade deficit. The falling rupee will continue to put pressure on costs- for fuel needs as well as daily essentials. Analysts believe high crude rates could also continue to hurt household budgets and corporate balance sheets further.