Indian Stocks Stumble Amid Eased Rate Hike Fears, Ongoing Middle East Tensions

Indian stock markets are set for a subdued start on Thursday as concerns over a US rate hike have eased, but Middle East tensions remain a major worry. The latest inflation reading in the US showed that consumer prices barely increased in July, reducing the likelihood of a Federal Reserve interest rate hike next month.

The drop in interest rates in the US is likely to push Treasury yields and the dollar lower, making emerging market equities such as India attractive for foreign investors. However, oil prices fell 1% on Thursday due to forecasters lowering global oil demand projections for 2026 because of the disruptions from the US-Israeli war on Iran.

The unresolved situation in the Strait of Hormuz continues to keep the geopolitical risk premium in energy markets elevated, according to Hariselvan Radhakrishnan, founder and CEO of HST Wealth. The ongoing quarterly earnings season and MSCI's index rebalancing announcement will also be in focus.