The ongoing conflict between Iran and Israel has significant implications for India, particularly in terms of energy security and economic stability.
As a major importer of oil, India is closely monitoring the situation, given the potential for disruptions in oil supply and price volatility.
Impact on India’s oil economy
India, the world’s third-largest oil importer and consumer, imports a significant amount of its petroleum from the Middle East.
India’s oil dependency on the Middle East leaves it highly vulnerable to disruptions in oil supply and price volatility. India is among the nations most vulnerable to changes in the global oil market as a result of the abrupt escalation of hostilities between Iran and Israel.
Following Iran’s attack on Israel over the weekend, Oil prices slipped on Monday, April 15, with the market downplaying the risk of a broader regional conflict, Business Today reported.
The current state of affairs emphasises how urgently India must keep bolstering its economic resilience and energy security.
Impact on Indian stock markets
Adani Ports, Sun Pharma, NMDC, Tata Consultancy, and other Indian companies that conduct business in Israel would be impacted. While the extent of the impact on these stocks is yet to be determined.
Market volatility
Experts suggest that the Indian stock market may experience volatility due to the escalating tensions between Iran and Israel. Rising crude oil prices, subdued Q4 earnings projections, and worries over delayed US rate cuts contribute to market uncertainties.
Gold prices
Geopolitical tensions have led to a increased buying safe-haven assets like gold, causing prices to rise. Gold is considered a hedge during uncertain times, and its prices are expected to remain bullish.
Impact on India’s exports
The conflict has already impacted India’s export prospects to Iran, with a 47 percent year-on-year decline in April-October 2023. The resumption of oil imports from Tehran could now take much longer, and Tehran’s alleged support of the Houthis in the Red Sea has ensured that this will not happen any time soon.
Current policy interventions
The trade secretary of India stated on Monday, April 15, that the government will decide on a policy to lessen any impact the confrontation between Iran and Israel may have on trade only when it has a complete understanding of the implications.
While speaking to reporters, Trade Secretary Sunil Barthwal stated, “Policy interventions will only come after we understand the issues traders are facing. Based on that exercise, whatever is needed, the government will address that.”
Past impact
Indian stock markets have historically shown a negative reaction to conflicts, with wars introducing uncertainty that impacts market performance. However, markets have demonstrated resilience and the ability to recover post-conflict, highlighting the importance of monitoring geopolitical events and understanding their potential impact on financial markets.
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