Asian Markets Slide As US-Iran Conflict Escalates, Oil Spikes; Dalal Street Set for Negative Start

Mumbai, July 13: Indian benchmark indices are set to open on a weak note on Monday, tracking broad-based losses across Asian markets after renewed military strikes between the United States and Iran.  

A sharp jump in crude oil prices, coupled with declines in US equity futures, has dented investor sentiment. 

Asia tumbles 

Asian equities came under selling pressure as investors reacted to the latest escalation in the Middle East, which raised fears of disruptions to crude supplies through the strategical Strait of Hormuz. Brent crude surged nearly 4% to trade near $79 a barrel, while US West Texas Intermediate (WTI) crude also rallied by the same amount.  

Japan’s Nikkei 225 declined more than 1%, while South Korea’s KOSPI slumped over 5%, amid concerns that higher energy prices and rising bond yields could weigh on corporate earnings. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9%.  

The spike in oil prices followed fresh US strikes on Iranian military targets over the weekend and retaliatory actions by Tehran, including renewed threats surrounding shipping through the Strait of Hormuz. The latest developments have revived fears of prolonged geopolitical instability in the Gulf, a region that accounts for a significant share of global oil exports.  

For Indian markets, elevated crude prices remain a key concern. India imports nearly 85% of its crude oil requirements, making sustained increases in energy prices a negative for inflation, fiscal balances and corporate profitability. Sectors such as aviation, paints, chemicals, logistics and oil marketing companies could remain under pressure if crude continues its upward trajectory, while upstream energy producers may find support. 

US futures indicate weak opening 

Although Wall Street is yet to begin Monday’s trading session, US equity futures pointed to a softer opening as investors assessed the implications of the latest geopolitical flare-up. Futures linked to the Dow Jones Industrial Average, S&P 500 and Nasdaq slipped in Asian trading, suggesting global risk appetite remains subdued despite Friday’s gains on Wall Street.  

On Friday, US equities had ended higher, with investors continuing to back artificial intelligence-linked technology stocks despite lingering geopolitical concerns. The Dow Jones Industrial Average rose 0.29%, the S&P 500 gained 0.42%, while the Nasdaq Composite added 0.29%. Market participants had largely looked past earlier tensions in the Middle East, focusing instead on the resilience of corporate earnings and optimism surrounding AI-driven investments.  

However, the weekend escalation has altered market sentiment. Investors are now expected to closely monitor upcoming US inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony later this week for clues on the interest-rate outlook, particularly as higher oil prices threaten to complicate the inflation trajectory.  

Cautious mood likely to dominate 

While domestic investors continue to monitor the ongoing earnings season for stock-specific triggers, global developments are expected to dominate sentiment in the near term. 

Market participants will closely watch movements in crude oil, the rupee and foreign institutional investor flows, alongside any further developments in the Middle East. If geopolitical tensions persist and crude prices remain elevated, volatility across emerging markets, including India, could intensify as investors reassess inflation risks and the outlook for global interest rates. 

Source

• Exchanges