Middle East oil risk keeps Indian markets cautious despite softer US inflation
Indian equities are set for a subdued open on Thursday as geopolitical pressure on crude supply offsets a cooler-than-expected US inflation print that lifted broader Asian markets.
India's benchmark indices are poised for a flat-to-negative start on Thursday, with Gift Nifty trading near 24,423.50, roughly 50 points below the Nifty futures' prior close. The signal comes after a volatile Wednesday session in which the Sensex slipped 188 points, or 0.24%, to 77,966.35, and the Nifty 50 shed 36 points, or 0.15%, to 24,435.95, recovering most of an intraday 1% drop in the final hour of trade.
The caution sits at odds with a broader Asian rally fuelled by softer US inflation data. South Korea's Kospi surged 4.48%, the Nikkei 225 gained 1.83%, and the Topix rose 1.01%. US CPI for July came in at 0.1% month-on-month and 3.4% year-on-year, easing fears of further Federal Reserve tightening and helping the S&P 500 and Nasdaq close up 0.3% and 0.5% respectively on Wall Street.
For India, however, the dominant variable is crude. Brent slid $1.29 to $87.69 a barrel and WTI fell $1.30 to $81.97 on Thursday after analysts trimmed 2026 global demand forecasts, citing disruption from the US-Israeli confrontation with Iran. Yet prices remain elevated by supply-side risks: repeated attacks on shipping, a US blockade of Iranian ports, and strikes on energy infrastructure including refineries.
US commercial crude inventories posted their largest weekly build since January 2023, according to the Energy Information Administration, driven partly by a sharp drop in exports. The inventory surge offered temporary relief, but traders note that the closure of key shipping routes and stalled diplomacy between Washington and Tehran limit any sustained downside in oil.
Pakistan, which has been mediating between the two sides, said the broader peace process has stalled, though the deadline for a US-Iran memorandum of understanding could still be extended. President Donald Trump has asserted that Washington holds "total control" over the strategic waterway at the centre of the dispute.
"Markets traded in a volatile range on Wednesday, extending their cautious tone amid renewed geopolitical concerns and mixed domestic factors," said Ajit Mishra, senior vice-president of research at Religare Broking. He noted that the Nifty briefly broke below the 24,350 support level before staging a late recovery.
Earnings wave and gold
More than 570 companies are scheduled to report April-June quarter results on Thursday, including Tata Motors Passenger Vehicles, LG Electronics India, Honasa Consumer, Max Financial Services and General Insurance Corporation of India. The volume of disclosures will test whether domestic earnings momentum can counterbalance external headwinds.
Gold, often a barometer of macro uncertainty, held steady near $4,400 an ounce. Spot bullion was down 0.1% at $4,403.02 after gaining 0.9% on Wednesday, as the soft CPI reading reduced the urgency for rate hikes but did not eliminate geopolitical hedging demand.
For portfolio managers watching India, the near-term calculus is clear: cheaper oil would relieve pressure on the current account and corporate input costs, but the Middle East standoff shows little sign of resolution. Until shipping lanes normalise or a diplomatic breakthrough materialises, Indian equities are likely to trade at a discount to the broader Asian bid.
