• Source:JND

Crude Oil Price: The crude oil prices skyrocketed on Thursday after signs of further extension of the deadlock at the Strait of Hormuz, a key energy supply route in the Persian Gulf, and heightening of tension between the US and Iran amid uncertainty around the second round of peace talks.

The Brent Crude, the global oil benchmark, surpassed the $120 per barrel mark for the first time since 2022. At the time of writing, Brent Crude was trading at $124.80, up $6.8 or 5.77 per cent. At the same time, New York-based oil benchmark 'WTI crude' jumped $2.81 or 2.63 per cent to $109.69 per barrel.

What Does It Mean for the Indian Market and the Indian Currency

Rupee vs Dollar

The rising crude prices have a destructive impact on the Indian rupee and the equity market as India imports over 80 per cent of its oil needs, and a significant portion of imports comes from Gulf nations.

In an instant reaction to the rising oil prices, the Indian Rupee fell significantly, surpassing the 95 level as compared to the US dollar. The decline in the rupee was also driven by greenback demand. In the morning trade, the Rupee was seen trading 0.34 per cent weaker at 95.174 as compared to the US dollar. The Indian currency was settled at 94.85 in the previous session.

"The main effect on the rupee has been from the rising oil prices, which touched USD 120 per barrel and looked headed for further upside as the US continues with its blockade of Iranian ports, while Iran does not allow any ship/tanker to pass through the Strait of Hormuz," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

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Rising Crude Price Impact on the Stock Market

The Indian equity indices were trading sharply lower in early trade as investors' sentiment was shaken due to a significant increase in oil prices. Both the key indices--Sensex and Nifty--were trading nearly 1.5 per cent lower, driven by massive selling pressure in banking, finance, and automobile stocks. The broader market was trading significantly down as well.

At the time of writing, the BSE Sensex was trading at 76,276.01, down 1,220.35 points or 1.57 per cent. Nifty50 quoted at 23,807.15, down 370.50 points or 1.53 per cent.

"There are two headwinds which can impact the market in the near-term. One, Brent crude at $120 threatens to worsen India’s macros; the downside risk to growth and upside risk to inflation will rise if the crude price remains elevated at this level. Two, the results from AI majors in the US and South Korea are better than expected," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.


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