Ceasefire prospects between Israel and Iran may support markets

Stocks are poised to open marginally higher on hopes of a reduction in hostilities between Israel and Iran. Markets in Asia moved higher at the start of trading on Monday, pulling back some of their losses from the end of last week.

Geopolitical Tensions roiled Markets Last Week. Key equity indices posted sharp losses during the week, driven by both domestic developments and global economic factors. Ongoing U.S.-China trade negotiations and escalating hostilities in the Middle East triggered a broad sell-off across the globe. Indian shares fell sharply alongside global markets as trade uncertainties and heightened geopolitical risks overshadowed growth prospects.

The US stock market delivered mixed results last week as investors navigated conflicting signals from economic data and escalating geopolitical risks. Early gains, driven by robust technology sector performance, stronger-than[1]anticipated May employment figures, and renewed optimism surrounding US-China trade negotiations, gave way to sharp declines as the war between Israel and Iran intensified. India’s dependence on the Strait of Hormuz.

The Strait of Hormuz, a narrow waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, stands as one of the world’s most critical maritime chokepoints. For India, over two-thirds of its oil imports and nearly half of its liquefied natural gas (LNG) imports transit through the Strait of Hormuz. If it is closed, that would send energy prices soaring and risk expanding the war. Higher prices have already impacted India’s import bill, affecting the rupee, which has tumbled to an 8-week low.

Hints of a giant oil reserves discovery by Hardeep Singh Puri, Minister of Petroleum and Natural Gas, outlined a bold vision for India’s energy independence, suggesting that the country may be on the cusp of discovering a game-changing oil reserve in the Andaman Sea, comparable to the massive oil find in Guyana. Nifty is currently undergoing short-term consolidation. Traders holding long positions should maintain a stop-loss at 24462. A breach below this level could lead to a further decline towards the 24164 support, and a sustainable close below 24164 would positionally reverse the bullish trend.

Conversely, a close above 25000 would negate the possibility of a downtrend. Our markets are poised to open marginally higher on hopes of reduced hostilities between Israel and Iran, with Asian markets recovering on Monday from last week’s losses.

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Source: HDFC Securities Prime Research