Indian equities could open under pressure on Friday as GIFT Nifty pointed to a weak start amid a fresh surge in crude oil prices and escalating geopolitical tensions in the Middle East. GIFT Nifty fell 0.59%, or 138.50 points, to 23,321.50, signalling a potential gap-down opening for domestic benchmark indices.
The negative cues come after Brent crude surged 6% to $107.21 a barrel, crossing the $107 mark for the first time since May 21. The sharp rise in oil prices has intensified concerns around inflation and the potential impact of higher energy costs on global economic growth.
US Stocks End Lower As Oil Tops $100
US stocks declined on Thursday as crude oil prices climbed above $100 a barrel, raising fears that a prolonged war in the Middle East could fuel inflation and keep interest rates higher for longer. The Dow Jones Industrial Average fell around 315 points, or 0.6%. The S&P 500 declined 0.5%, while the Nasdaq Composite also slipped 0.5%.
The rise in energy prices pushed the 10-year US Treasury yield above 4.9%, its highest level since November 2023.
High-beta chip stocks, which have been among the biggest drivers of the recent market rally, came under pressure as investors assessed the impact of higher rates and energy costs on economic growth. Intel and Micron Technology both fell 5%.
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Heating oil futures for October delivery also touched $5.0189 per gallon on Thursday, their highest level since April 29, 2022.
Middle East Conflict Keeps Oil Markets On Edge
The latest increase in crude prices followed a fresh escalation in the US-Iran conflict, with Tehran warning that it was prepared for a more intense confrontation. The developments have revived concerns about potential disruptions to energy flows through the Strait of Hormuz, one of the world's most important oil shipping routes.
Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, said elevated Brent prices and uncertainty around the geopolitical situation remained key drags on investor sentiment.
Investors are now weighing higher energy costs and their impact on inflation and monetary policy against the worsening geopolitical situation.
ECB Rate Decision Adds To Global Rate Concerns
The European Central Bank raised interest rates for the second time since the Iran war broke out, with the surge in oil prices prompting investors to increase bets on further rate hikes. ECB President Christine Lagarde described the decision as "a no brainer", highlighting the growing challenge posed by higher energy prices to the inflation outlook.
ALSO READ: Brent Spikes To $107 After Saudi Arabia Flags Lowest OPEC Oil Output Since 1990
For global equity markets, the combination of surging crude prices and elevated bond yields presents a challenging backdrop, particularly for high-valuation technology and growth stocks.
Indian Markets Halt Three-Day Losing Streak
The decline comes after Indian benchmark indices managed to end higher on Thursday despite weak global cues and elevated crude prices. The Nifty 50 gained 46.30 points, or 0.20%, to close at 23,477.80, while the Sensex rose 138.36 points, or 0.19%, to 74,902.59.
Both indices recovered from intraday pressure to finish in positive territory, halting a three-session losing streak.
However, the sharp overnight rise in crude prices and weak global markets could test the domestic market's resilience on Friday.
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