Iran-US Conflict, Crude Prices, Inflation Top Market Headwinds: Kotak

Kotak Institutional Equities has identified four key macro issues that could create headwinds for markets in the coming weeks. The brokerage firm cited the ongoing Iran-US conflict, rising crude prices due to dwindling inventories, stubborn inflation across developed and emerging markets, and growing bond-market concerns over deteriorating public finances.

The continued stalemate on the Iran-US conflict has the potential to weigh heavily on economies and markets if the standoff remains unresolved. Oil markets have started to worry about declining inventories after remaining relatively relaxed about the war's outcome. Kotak warned that another few weeks of negligible oil supply through the Strait of Hormuz could push crude prices to 'worrisome levels'.

On inflation, Kotak said a mix of high inflation and lax fiscal and monetary policies could put upward pressure on global bond yields. Inflation has remained above DM central-bank targets for several months, while current low or negative real interest rates are inconsistent with economic activity levels and 'high' asset prices.