Crude on the Boil - Markets Poised To Weather Growing Geopolitical Headwinds  

A U.S. attack on Iranian nuclear facilities would likely cast a substantial shadow of uncertainty over global risk sentiment. This ongoing conflict could propel oil prices to even greater heights, triggering an immediate flight to safety as investors assess how this latest escalation might ripple through the interconnected global economy. Oil prices jumped on Monday to their highest since January as Washington’s weekend move to join Israel in attacking Iran’s nuclear facilities stoked supply worries. Iran is considering closing the key oil shipping route, the Strait of Hormuz, after the US bombed three of its nuclear facilities. The Strait of Hormuz is one of the world’s most critical chokepoints, through which a fifth of the global oil and gas supply flows.  

Brent crude futures spiked to $81 per barrel before retreating to $78.80, while U.S. West Texas Intermediate crude climbed $1.87 to settle at $75.71 per barrel. The Indian stock market demonstrated remarkable resilience last week, despite global uncertainties and mixed domestic sentiment. The trading period began with significant headwinds as benchmark indices faced intense selling pressure, driven by escalating geopolitical tensions in the Middle East. However, the market’s underlying strength became evident as it staged a convincing recovery in the latter half of the week. This turnaround was primarily fuelled by robust domestic liquidity and buying that emerged at lower levels. 

 Markets are navigating these developments reasonably well, with major indices avoiding significant damage. However, we cannot discount the possibility of unpredictable contagion effects across global markets if hostilities continue to escalate. We expect our markets to respond unfavourably and open lower before attempting to recover from these initial losses. Immediate resistance is now placed at 25222 levels. Support has shifted upwards to 24800 levels. 

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Source: HDFC Securities Prime Research