Image Credits - Al Jazeera
As geopolitical tensions between Iran and Israel escalate, market observers are increasingly concerned about the ripple effects on global and Indian financial markets. While equities have so far managed to weather earlier conflicts, such as the recent unrest between Israel and Gaza, the situation with Iran could pose a more significant threat.
Gaurang Shah, Senior Vice President at Geojit Financial Services, highlights that any further escalation, particularly if Iran deploys more destructive weapons or if other nations become involved, could severely disrupt crude oil supplies. This would be especially impactful for oil-importing countries like India and China. Recent downturns in crude oil prices, driven by fears of a US recession, could be countered by potential price spikes if the conflict intensifies. As of August 5, Brent crude futures were trading at $76.28 a barrel, and US West Texas Intermediate futures were at $72.95.
The broader impact of these tensions is already visible, with declines in Middle Eastern equities and fluctuations in gold prices. On August 5, international gold prices experienced a sharp drop but later stabilized at around $2,440 an ounce.
Despite these global uncertainties, Indian markets are displaying resilience. Market experts like Shah and Bathini believe that robust domestic investment and liquidity will help cushion Indian equities from severe global shocks. India’s mature retail investor base and steady Systematic Investment Plan (SIP) inflows bolster this resilience. Additionally, foreign investment is expected to flow into emerging markets as global uncertainties increase.
While some investors may shift towards safer assets like gold and platinum, Indian stocks are poised to remain relatively stable. Increased geopolitical stress could drive further investment into emerging markets, with fixed-income portfolios diversifying across regions to mitigate risks.