Financial markets have been rocked by the prospect of a dramatic increase in crude oil prices as a result of this battle, and Dalal Street investors are clearly concerned.
Stock market analysts are concerned following the unexpected attack by the Palestinian terrorist organization Hamas on Israel. They have expressed concern that the attack may result in a geopolitical crisis with far-reaching effects on international equities markets, including India.
Following the Hamas attack against Israel, pressure on stock markets around the world has risen. At a time when they were already high due to restricted supply from major oil producing nations, the development has caused a dramatic increase in crude oil prices.
However, the potential for a big increase in crude oil prices as a result of this battle has shocked the financial markets, with Dalal Street investors displaying clear symptoms of anxiety as demonstrated by a sharp decline in benchmark indices on Monday.
Broader domestic markets saw a strong increase in volatility as the S&P BSE Sensex fell by more than 300 points and the NSE Nifty 50 fell by more than 90 points around 11:35 am.
Impact decoded by experts
Santosh Meena, Head of Research at Swastika Investment, shared his thoughts on the effects of the Israel-Hamas conflict and highlighted his concerns about the possibility of a negative effect on domestic stock markets.
The prolonged violence in Israel is an unexpected occurrence that is having an impact on the market, and its ramifications might not be felt right away, he said. It’s crucial to keep a tight eye on the situation, especially given the potential involvement of other parties like Iran.
Meena drew attention to the grave concern over the potential for a third front involving Iran, which might result in a dramatic rise in crude oil prices and further agitate the market. He cautioned that the prospect of a third front including Iran was “significantly concerning” because it might lead to a dramatic rise in crude oil prices.
Meena evaluated the situation from a technical perspective and said, “The 19,300-19,250 area is a significant demand zone for the Nifty. The market is likely to remain in a sideways pattern until it finds stability inside this range, with a significant barrier at 19,800.
He also recommended short-term traders to exercise prudence and to avoid entering deals too quickly. He did add, though, that a significant drop might offer long-term investors a fantastic purchasing opportunity.
What are local investors supposed to do?
Director at Master Capital Services Ltd. Palka Arora Chopra expressed her worries about the developing circumstances. She made note of the possibility that rising geopolitical uncertainties in the Middle East could result in higher crude oil prices and more volatile stock markets.
As there may be a persistent decrease in oil supply, Chopra issued a dire warning: “This can have a lasting and significant impact on oil markets. Rising crude oil prices could have an influence on domestic inflation and cause interest rates to stay high for an extended length of time.
She also mentioned that because of increased bond yields, foreign institutional investors (FIIs) have been consistently selling, and the latest conflict may make them even more uneasy.
Investors should keep a careful eye on the nature and duration of the battle, according to Chopra, since it may have a significant impact. She also emphasized industries like paint and chemicals as areas of concern, as rising crude oil prices may have a short- to medium-term impact on their profit margins.