Indian stocks stall as oil surge and US sanctions threat cloud Asian market outlook
Indian equities face a cautious open as escalating Middle East tensions drive crude oil higher and threaten to derail regional economic growth.
Indian benchmark indices are poised for a cautious start on Monday, snapping a two-week winning streak as rising energy costs and geopolitical uncertainty weigh on investor sentiment. The Sensex and Nifty 50 closed lower on Friday, and Gift Nifty futures indicate a negative open, dropping 44.10 points to 24,405.50.
The market pullback reflects growing anxiety over the ongoing US-Iran conflict, which is now in its sixth month and has pushed global crude prices up more than 40 per cent this year. Brent crude held just below $89 a barrel on Monday following a 6 per cent surge last week, while West Texas Intermediate traded around $82.
Renewed clashes in Lebanon and continued attacks on shipping in the Strait of Hormuz have clouded prospects for a ceasefire, keeping inflation concerns elevated across emerging markets. Ponmudi R, chief executive of Enrich Money, noted that continuous geopolitical instability is masking solid domestic economic foundations and resilient first-quarter corporate earnings in India.
The risk of further energy supply disruptions intensified after US Treasury Secretary Scott Bessent indicated that additional sanctions on Iran could be announced as early as this week. President Donald Trump has signalled his intention to apply severe economic pressure on Tehran, dismissing concerns about resolving the conflict before the November midterm elections.
Tehran and Muscat are reportedly nearing an understanding regarding the management of the Strait of Hormuz, but American officials are excluded from these talks. The US government is expected to reject any deal that does not ensure unrestricted transit through the critical channel, a route that historically handled about 20 per cent of global daily oil and liquefied natural gas shipments.
The economic toll of the conflict is already visible in major Asian economies, with Japan reporting second-quarter gross domestic product growth that missed expectations. Output expanded at an annualised rate of 1.1 per cent, falling short of the 2 per cent consensus as sluggish domestic consumption negated strong outbound shipments.
These figures represent the first full three-month period capturing the financial fallout of the war, which has significantly inflated power and fuel expenses for Japanese corporations and consumers. The deceleration from the prior quarter's 2.1 per cent growth underscores the fragility of import-reliant nations facing sustained regional hostilities.
Regional equities remained subdued on Monday, with the MSCI Asia-Pacific index excluding Japan trading sideways while South Korean exchanges shut for a public holiday. Across the Pacific, American equity futures hovered near unchanged levels, even as the S&P 500 prepares for a fourth consecutive week of advances fuelled by robust corporate profits.
Safe-haven assets continue to benefit from the uncertain macroeconomic backdrop and a softer greenback, which has diminished market bets on a Federal Reserve rate hike next month. Spot bullion added 0.3 per cent to reach $4,388.62 an ounce during early regional trading, while December delivery contracts edged up 0.2 per cent to $4,444.30.
