Global markets tumbled as US-Iran tensions and prolonged Israeli conflict drove oil prices higher. Asian shares and futures dipped, with investors preparing for extended fighting. The inflationary pressures have reduced expectations for central bank rate cuts.
Escalating US-Iran tensions, alongside a prolonged Israeli conflict, have sent oil prices soaring, leading to a tumble in global markets. According to reports from The Economic Times, Asian shares and futures dipped as investors brace for weeks of fighting. This development has created an inflationary shock, extinguishing hopes for rate cuts and pushing central banks toward potential hikes, while hammering bonds. The dollar strengthened as a safe haven asset. Geopolitical tensions, including US President Donald Trump's stance on the Strait of Hormuz, are fueling market nervousness, particularly in India where analysts predict the Nifty index will remain volatile this week. Key support is at 22,900, with a break potentially taking it to 22,500 if tensions escalate further; upside is capped between 23,400 and 24,200. Investors are drawing parallels to 2022 market behavior amid Iran war risks, with concerns over an inflation shock increasing stock index correlations and volatility, driven by rising oil and gas prices. Major central banks, including the Fed, ECB, BOJ, and BOE, held rates unchanged, signaling hawkishness due to Iran conflict-driven inflation risks that have lifted long-term yields and diminished prospects for 2026 cuts. Equity markets have pulled back modestly, with analysts warning of further downside and a plausible 20% decline in the S&P 500 as oil prices, rates, and credit spreads rise. Energy equities are seen as a tactical hedge while the conflict persists.
