Gift Nifty Indicates Weak Opening for Markets After Iran Strait of Hormuz Attack

Mumbai, July 8: Indian markets may open lower on Wednesday tracking fresh risk-off moves after Iranian Strait attacks lifted crude oil prices even as Asian benchmarks moved with gains for most part.

Gift Nifty was trading down 19 points at 24,232.50, indicating a weak start for Nifty 50 after Tuesday’s choppy session snapped four straight days of gains.

US launched fresh airstrikes on Iran on Tuesday evening, Reuters reported. On Tuesday, American forces struck more than 80 targets in Iran, including over 60 small boats belonging to Iran’s Islamic Revolutionary Guard Corps in retaliation for Iranian attacks on three commercial tankers in the Strait of Hormuz overnight. Washington also announced it is revoking Iran’s license to sell oil abroad, dealing a direct blow to a tentative ceasefire agreed last month between the two countries.

Also Read: What Is GIFT Nifty?

Local media on Wednesday reported explosions near oil facilities on Kharg Island, where Iran exports most of its crude, as well as Qeshm Island and at two ports, Sirik and Bandar Abbas. With oil infra being attacked this time too, concerns are mounting that the US-Iranian ceasefire called off last month may not hold at all.

Oil Prices

Oil prices on Wednesday are heading sharply higher as mentioned above. Brent crude futures rose 1.9 per cent to 75.54 dollars per barrel while US West Texas Intermediate gained an identical 1.9 per cent to 71.81 dollars a barrel after rising as much as 2.5 per cent earlier in the session, building onto a 2.9 per cent rally seen on Tuesday after sanctions against Iran were reimposed. “Even assuming that shipping traffic returns to somewhere near pre-war levels (some Iranian vessels will likely continue to stay in port indefinitely) it seems plausible that shipping disruption will continue to provide some support to prices even as the market abruptly switches from pricing a very large oil surplus into now presumably pricing a deficit,” said Stephen Innes, Head of Asia Pacific Currency Trading at AxiTrader. India, which is a large net importer of crude oil, faces inflationary pressures and widening trade deficit if oil prices sustain higher levels for long.

Asian Markets on Wednesday Morning

Asian markets also nursed losses overnight but pared some losses seen in early trades. Hong Kong’s Hang Seng led the gains across Asia with 1.65 per cent rise while Indonesian JSX Composite added 1.19 per cent. Japan’s Nikkei225 declined 0.96 per cent while Australia’s S&P ASX 200 shed 1.11 per cent.

US Markets on Tuesday Closing

US markets nursed losses overnight tracking Iran developments and rising crude oil prices. Nasdaq Composite shed over 1 per cent while S&P 500 and Dow Jones Industrial Average declined 0.4 per cent and 0.25 per cent respectively. Weak closing on Wall Street typically translates into negative start for Asian and Indian markets during following sessions.

Indian Markets

Indian markets ended weak on Tuesday led by broad-based selling and dragged by index heavyweights. The Sensex lost 0.13 per cent to end at 40,352.02 while Nifty 50 fell a similar 0.13 per cent to close at 12,033.40 with heavy selling seen in Trent (TRENT), Adani Enterprises (ADANIENT) and Bharat Electronics (BEL). IT stocks lent some support to the markets throughout the session. On NSE, only 666 stocks advanced as against 1,931 stocks that declined while 189 were unchanged, indicating weakness throughout the market.

With Gift Nifty now indicating soft open for Indian markets on Wednesday and Iran-oil-Wall Street combination negative for riskier assets, traders will be watching cues whether Wednesday’s weakness extends through the day or pauses for fresh buying at lower levels. Sectors like paints, tyres and aviation with direct oil price linkage may see outsized moves in light of Brent and WTI rallying once again. India markets may continue to trade on news-driven cues until there is visibility on Strait of Hormuz attacks whether it is just a one-off tit-for-tat retaliation or the beginning of sustained hostilities restoring investor confidence.

Source: nseindia.com