Asian Markets Down as Oil Climbs on Fresh Iran Tensions; Muted Start Seen for Indian Equities

Mumbai, June 29: Indian benchmark indices are set for a cautious start on Monday as weakness across Asian markets and a rebound in crude oil prices offset support from positive U.S. equity futures. 

Asian shares traded lower after renewed U.S.-Iran strikes over the weekend revived concerns over the Middle East, prompting investors to trim risk exposure. Japan’s Nikkei fell 0.7%, while South Korea’s Kospi dropped 1.7%, with technology stocks bearing the brunt of the selling. The broader MSCI Asia-Pacific index outside Japan slid 2.6%, reflecting cautious sentiment across the region. 

The renewed geopolitical tensions came after the United States struck Iranian nuclear facilities, followed by retaliatory attacks from Iran, raising concerns over the durability of the ceasefire that had briefly eased fears of a wider regional conflict. While investors do not expect an immediate disruption to global oil supplies, the latest developments have revived uncertainty around the Strait of Hormuz, a critical shipping route for crude exports. 

Oil rebounds after recent correction 

Crude oil prices climbed in Asian trade, reversing part of last week’s sharp decline. Brent crude traded above $72 a barrel, while U.S. West Texas Intermediate hovered around the $70 mark as markets priced in a fresh geopolitical risk premium. 

The rebound in oil could weigh on Indian equities, particularly sectors sensitive to higher input costs such as aviation, paints, chemicals and oil marketing companies. Airline stocks, which rallied sharply last week on expectations of lower aviation turbine fuel (ATF) costs, could see some profit-booking if crude extends its gains. 

At the same time, upstream oil producers and exploration companies may remain in focus if crude prices continue to edge higher. 

Wall Street futures offer some support 

Despite the weak Asian mood, U.S. stock futures pointed to a mildly positive opening: The Dow Jones Industrial Average posted modest gains of 0.3%, while the S&P 500 was up 0.6% and the Nasdaq rose the same. 

The resilience in U.S. futures suggests investors remain hopeful that the latest Middle East flare-up will remain contained and will not materially disrupt the global economy. 

What it means for Dalal Street 

For Indian markets, the combination of weak Asian equities and firmer crude prices suggests a muted opening. However, improving sentiment in U.S. futures indicates investors are not yet pricing in a prolonged geopolitical escalation. 

Market participants will also keep an eye on global bond yields and the U.S. dollar, both of which remained elevated amid expectations that the Federal Reserve could raise rates later this year. Focus will gradually shift to key U.S. economic data due later this week, including the June payrolls report, for fresh clues on the trajectory of global monetary policy. 

While geopolitical headlines are likely to dictate intraday sentiment, the broader direction for Indian equities will continue to hinge on crude oil prices and foreign institutional investor flows. 

Source

•  Exchanges