Asian Markets Slide as Oil Shock Rattles Global Sentiment; Weak Start Seen for Indian Equities

Mumbai, May 18: Asian markets slid on Monday as a fresh spike in crude oil prices and rising bond yields rattled sentiment, suggesting a weak start for Indian equities. GIFT Nifty futures also signalled a softer opening for local benchmarks.

Investor nerves were shaken after tensions in the Middle East escalated further after reports of a drone attack on a UAE nuclear facility and continuing uncertainty around the Strait of Hormuz, a key global oil transit route. Brent crude climbed above $111 per barrel, while U.S. crude surged past $107, raising fears of higher inflation and slower global growth.

Asia Falls

Japan’s Nikkei slipped nearly 1%, and MSCI’s broadest index of Asia-Pacific shares outside Japan traded in the red, down 0.8%, while Hong Kong’s Hang Seng fell 1.6%.However, South Korean’s Kospi bucked the trending, rising 0.8%. Increasing oil prices particularly weigh on import-heavy Asian economies, including India, which remains vulnerable to elevated energy costs and currency pressures.

Yields Climb

The sharp jump in crude also triggered a selloff in global bond markets. U.S. Treasury yields climbed to multi-month highs, with the benchmark 10-year yield touching 4.63%, as traders increasingly priced in the possibility that the Federal Reserve may have to keep interest rates elevated for longer or even resume tightening later this year. European bond markets also weakened ahead of the region’s trading session.

Futures Lower

US stock futures were lower in early Asian trade on Monday. Dow futures dropped around 400 points, while S&P 500 and Nasdaq futures also slipped as investors reassessed the impact of surging energy prices on inflation and corporate earnings.

Despite recent resilience in U.S. technology stocks driven by the artificial intelligence rally, sentiment has turned cautious ahead of a crucial earnings week led by chip giant Nvidia and retail heavyweight Walmart. Investors are expected to closely watch Nvidia’s outlook for clues on whether enthusiasm around AI can continue to support global equities amid mounting macroeconomic risks.

Sentiment Fragile

For Indian markets, the combination of soaring crude oil prices, a weakening rupee and sustained foreign fund outflows could keep sentiment fragile in the near term. Rising oil prices are particularly negative for India’s inflation trajectory and current account balance, potentially limiting the Reserve Bank of India’s room for policy easing.

Stock-specific action may also remain in focus, with investors reacting to recent quarterly earnings from companies. Overall, the global risk-off mood suggests Indian benchmarks could begin the week on a cautious and volatile note.

Source:

• Exchanges