Global Markets Reel As Oil Jumps to Six-Week High Amid Middle East Escalation; Domestic Equities Face Pressure

Global Markets Reel As Oil Jumps to Six-Week High Amid Middle East Escalation; Domestic Equities Face Pressure​

Indian stock benchmarks are poised for a challenging start on Thursday as geopolitical tensions escalate and crude oil prices surge. GIFT Nifty is trading lower, signaling further weakness for domestic equities despite buoyant activity across various Asian markets driven by AI optimism. The rising cost of energy remains the dominant concern for investors, threatening inflation targets and corporate margins within India.

GIFT Nifty Signals Weak Start Amid Consecutive Losses​

The Indian equity market faced a challenging close on Wednesday. Both the Sensex and Nifty registered losses as domestic sentiment was weighed down by sharp movements in crude oil prices, a decline in the rupee, and profit booking among heavyweight stocks. The Sensex finished at 76,755.05, declining 715.06 points or 0.92 percent.

The Nifty also closed lower, hitting 23,996.25, marking a fall of 191.45 points or 0.79 percent on Wednesday. Anticipation remains low as GIFT Nifty was observed at 23,865 around 8:00 am, down 96.5 points or 0.40 percent. This continuous decline represents the third consecutive session of losses for domestic equities, suggesting a subdued opening for investors.

Crude Oil Jumps to Six-Week High Amid Middle East Conflict​

Crude oil prices have become the single biggest risk factor for global markets following escalating conflict in the Middle East. Brent crude futures surged 2 percent, reaching approximately $96 per barrel after previously trading above $94. US West Texas Intermediate crude climbed 1.7 percent to reach $88.27 per barrel.

These sharp movements follow reports of fresh instability, including strikes launched by the United States on Iran and alleged targeting of oil tankers in the Red Sea by Yemen's Iran-backed Houthis. For India, maintaining stable crude prices is crucial as sustained strength in energy costs directly impacts inflation levels, corporate margins, and the current account deficit.

Asian Equities Rally on AI Spending Optimism​

In contrast to the domestic pressure points, Asian equities demonstrated significant breadth and underlying optimism. The MSCI's broadest index of Asia-Pacific shares outside Japan rose approximately 1 percent, positioning it for a weekly gain nearing 3 percent.

This rally is fundamentally driven by renewed optimism surrounding artificial intelligence infrastructure spending, specifically following major US technology firms outlining robust capital expenditure plans. South Korea’s Kospi saw a surge exceeding 3 percent, led by gains in chipmakers such as SK Hynix and Samsung Electronics, while Japan's Nikkei advanced about 1 percent.

Wall Street Ends Mixed Despite Tech Optimism​

US equities ended Wednesday on a mixed note as investors processed corporate earnings alongside pending results from major technology firms. The Dow Jones Industrial Average saw little change, slipping 0.01 percent. The S&P 500 eased slightly by 0.14 percent, while the Nasdaq Composite underperformed, falling 0.57 percent.

The mixed movement in large technology stocks offset broader optimism surrounding investment in artificial intelligence infrastructure across the global tech supply chain.

Institutional Flows Continue Downward Pressure​

Institutional flows reflected a bearish sentiment among foreign investors. Foreign institutional investors (FIIs) continued their trend of selling, offloading Indian equities worth Rs 819 crore on Wednesday. Domestic institutional investors (DIIs) also extended their selling for the second consecutive session, contributing to a decline by selling equities valued at Rs 418 crore.