Amid the escalating tensions in US and with the addition of inflation fears, the Indian markets are likely to see a gap down opening on Thursday. While the Fed maintained its interest rate at 3.50%–3.75%, Chair Jerome Powell added that if inflation does not 'progress' there will be no rate cuts.
However, while the Fed's projections forecasted around two more rate cuts this year, he acknowledged that could change if inflation remains stubborn. “The rate forecast is conditional on the performance of the economy, so if we don't see that progress, then you won't see the rate cut,” he said.
GIFT Nifty as of 1:32 a.m. was trading at 23,192.50, down 2.55% or 597 points, slipping near the 23,200 mark. US markets also fell amid war jitters and the US Federal Reserve maintained its interest rate. S&P 500 and tech-heavy Nasdaq fell 1.3%, while Dow Jones Industrial Average fell 1.6%.
Oil was on the rise with West Texas Intermediate crude rising 2.3% to $98.47 a barrel and Spot gold fell 3.1% to $4,850.07 an ounce.
The US Federal Reserve on Wednesday kept its key interest rate unchanged for the second time, in line with expectations. In addition, core inflation rate is expected to be at 2.7% by end of 2026, up from 2.5% forecast in December.
“The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation,” he said. “It should come as we start to see in the middle of the year, progress on tariffs... going through once and then tariff inflation coming down.”
Powell, in his speech, said, "Near term inflation expectation are up in the recent weeks."
He further added that energy prices will push up overall inflation and some of the oil shock will show up in core inflation. The series of shock due to the Middle east war have interrupted inflation progress, he pointed.
In addition to this, Iran warned of attack on Gulf oil facilities in retaliation to the hit on its South Pars gas field and nearby infrastructure, further pushing the markets lower.
The attack on South Pars would mark the first strike on Iran's upstream facilities since the war began. While the US struck oil export hub Kharg Island late last week, it limited that attack to military targets.
In response to the attack Iran's Islamic Revolutionary Guard Corps responded by publishing a list of Gulf energy sites in Saudi Arabia, the United Arab Emirates and Qatar. According to the IRGC these locations have become direct and legitimate targets, the semi-official Tasnim news agency reported.
Earlier in the day Iran media reported that Phases 3, 4, 5 and 6 of the South Pars gas field were hit, forcing a shutdown to contain a fire. Firefighters were deployed, however no casualties were reported. Qatar condemned the attack saying Israeli targeting of facilities linked to Iran's South Pars field, an extension of Qatar's North Field, is a dangerous and irresponsible step amid the current military escalation in the region”.
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