Kolkata: The escalation in geopolitical tension between Iran and Israel has impacted the Indian stock markets, gold and crude prices and is also likely to impact basmati and tea exports from India to Iran. Indian equity benchmarks experienced a sharp decline on Monday, driven by geopolitical tensions between Iran and Israel.
Finally, Nifty settled the day in negative territory at 22,273, said Asit C Mehta Investment Intermediates Limited. The Nifty Bank index closed the day in the negative zone, around 47,773 levels. Short-term support levels for the Bank Nifty are observed at 47,000 and 46,400, with resistance levels at 48,000 and 49,060.
COMEX gold prices extended gains for the fourth straight week and notched a record high of $2448.8 per troy ounce during the previous week, amid an escalation in geopolitical tensions. Markets were gauging the impact of an Iranian attack on Israel and feared it would mark the explosion of a full-blown regional war. Even though the attack during the weekend was foiled with the help of Israel’s allies, markets weigh the risk of retaliation. For the week, US Retail sales and industrial production, along with a slew of Chinese data and speeches from FOMC members, will be watched.
Taking a cue from the rising prices of the yellow metal, gold price in India has shot up to Rs 73,000 per 10 grams ahead of the Akshay Tritiya, which falls on May 10. This has dampened the mood among the customers and they are shying away from gold purchases.
Oil prices are currently high due to rising tensions in the Middle East. The news of Israel preparing for a potential Iranian attack has spooked the market, leading to concerns about potential disruptions to oil supply and keeping the prices elevated.
Before the Iranian assaults, oil prices already reflected a $5–$10 per barrel risk premium from downside risks to supply. Over the past two years, Iran's crude production has increased by almost 20% to 3.4 million barrels per day or roughly 3.3% of the world supply. Thus, a higher geopolitical risk premium may result if the market priced a greater likelihood of decreased Iran supply. While geopolitical tensions can cause price spikes in the short term, the long-term outlook suggests a possible slight decrease due to increased production, said Amit Goel, Co-founder & Chief Global Strategist at Pace 360.
Exports from India will be affected, too, if the geopolitical tension between Iran and Israel escalates. Dr Ajay Sahai, director general & CEO of the Federation of Indian Export Organisation (FIEO) said, “Any escalation now will impact the global trade. India plays a critical role in global trade and therefore exports from India will be affected, too. Moreover, if oil prices go up, inflation numbers will rise and the Central Bank of the country will not be able to cut down rates. This will have a slowdown effect on the economy.”
Tea exporters are concerned over the escalation in tension between Iran and Israel. Mohit Agarwal, director of Asian Tea Company, a leading tea exporter to Iran said “We are very nervous over the current situation. With Navroz starting, we had great hopes from Iran this year. The first two sales from Iran have been robust and we were thinking that situation will be normal this year.”
Agarwal said that last November 2023, Iran halted most tea imports after uncovering a $3.4 billion embezzlement by the nation's only tea importer, involving government subsidies for tea blending for export, which had brought down Indian tea exports to Iran to around 5.5 million kg. “We were hoping that there would be no further retaliation from Israel then the movement of tea would be impacted sharply. We are expecting to export 40 million kg of orthodox tea to Iran this year. Assam orthodox tea has a very strong brand recall in the Gulf nation,” Agarwal said.
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