The escalating tensions in the Middle East rattled global markets in Monday’s session, March 2, with the Indian stock market also coming under pressure as both key indices closed more than 1% lower.
The Nifty 50 closed 1.24% lower at the 24,865 level, while the S&P Sensex lost 1.29% to settle at 80,238. The broader markets also faced deep cuts, with both the Nifty Midcap 100 index and the Nifty Smallcap 100 index falling over 1.5%.
The US and Israel attacked Iran over the weekend, reportedly killing Iran’s Supreme Leader and several other military officials, reflecting the risk of another full-blown war in the region.
Hours after the attack, Iran retaliated by targeting US military installations around the Gulf, with the conflict now entering its third day. Latest reports suggest that Saudi Aramco halted operations at the Ras Tanura refinery in Saudi Arabia after a drone strike in the area.
The ongoing tensions triggered a massive rise in crude oil prices, and concerns also mounted over the potential for escalation and possible disruptions to the Strait of Hormuz, through which nearly 20% of global oil flows and over 40% of India’s crude imports transit.
Iran is the fourth-largest oil producer in OPEC, producing just over 3 million barrels per day in January. The country shares a coastline along the Strait of Hormuz, one of the world’s most critical chokepoints for global oil trade.
Rising geopolitical tensions generally push risk assets out of investors’ favour as they seek refuge in safe-haven assets such as gold and silver.
(more to come)