Oil surges past $92 on Iran strikes, dragging Indian shares lower
Escalating US strikes on Iranian targets have pushed crude to a two-month high, triggering sell-offs in Indian equities while Wall Street finds support in a semiconductor rally.
Indian benchmark indices Sensex and Nifty opened lower on Wednesday as escalating Middle East tensions drove oil prices above $92 a barrel. For a net importing nation like India, a sustained surge in crude prices threatens to inflate corporate input costs, strain the current account deficit, and complicate the central bank's inflation management strategy.
The immediate catalyst for the broad-based sell-off in Asian markets is a sharp military escalation in the Persian Gulf. US forces carried out strikes on Iranian military targets for an 11th consecutive night. Simultaneously, Kuwait reported dealing with attacks by Iranian drones. These operations intensified fears of fresh supply disruptions in a region critical to global energy trade, pushing crude to a two-month high.
Despite these mounting geopolitical headwinds, Wall Street’s main indexes managed to close higher on Tuesday. A sharp rally in semiconductor stocks successfully overshadowed broader market concerns regarding the Middle East conflict and ongoing international tariff disputes. Market participants in the US are prioritizing corporate performance, turning their attention to upcoming earnings reports from major technology companies for fresh signals on the outlook for artificial intelligence investments.
The divergence in global equity performance is mirrored in currency and commodity markets. The yen hovered near a nearly four-decade low against the dollar on Wednesday. Higher oil prices and rising US Treasury yields heavily boosted the greenback. This dynamic has kept currency traders on high alert for potential intervention by Japanese authorities to stabilize the depreciating yen.
Traditional safe-haven assets are drawing increased demand as investors hedge against both military and monetary uncertainty. Gold climbed to its highest level in nearly two weeks, driven by technical buying. Traders are closely watching the escalating conflict while looking ahead to next week's US Federal Reserve meeting for definitive signals on the future interest rate path.
Foreign institutional capital, however, continues to demonstrate a strategic appetite for Indian assets. Overseas investors remained net buyers across sectors during the first half of July. According to NSDL data, this activity extended their buying streak to a second straight fortnight, recording their strongest inflows since early February and suggesting that long-term structural allocations remain intact despite short-term oil shocks.
