Investors brace for a volatile week on D-Street

Mumbai: Indian equities could wilt early this week as the escalating Iran-Israel conflict threatens to engulf both emerging-market risk assets and commodity supply chains in one of the most volatile geographies on the planet. With oil prices expected to leap on worries about supply disruptions in the wake of the clash, investor sentiment is expected to be on the edge, prompting a shift in money commitments to safe-haven assets, such as bullion.

“Investors need to brace themselves for increased volatility in the coming week, given the heightened geo-political temperatures,” said Aamar Deo Singh, Sr. Vice President, Research, Angel One.

Domestic markets tend to be sensitive to oil price movement globally because India imports over 80% of its crude requirements. On Friday, Brent crude futures crossed $90.

“If push comes to shove between Israel and Iran, $100 or more is likely,” said Ed Yardeni, founder and chief investment strategist at New York-based Yardeni Research. On Sunday, Israel stocks were down 0.7%, Saudi Arabia was down 0.2% and Kuwait 1%.

Israel said on Saturday Iran launched more than 300 drones and missiles at it. The attack, according to Tehran, was in response to Israel’s raid on the Iranian consulate in Syria earlier this month. Investors are watching whether this conflict ends up being a full-blown war.

“The financial markets are bracing for this calamitous scenario,” said Yardeni.On Friday, India’s equity indices fell over 1% each after the hotter-than-expected US March inflation data dimmed hopes of an interest rate cut in June, resulting in a spike in the US bond yields. The rising geopolitical risks boosted the US dollar’s appeal as a safe-haven asset.