US-Iran Tensions, Crude Prices to Dominate Indian Stock Market

The Indian stock market is expected to be influenced by several key factors in the holiday-shortened week ahead, including developments in the US-Iran situation and crude oil prices. The NSE will remain closed on Friday for Mahatma Gandhi Jayanti. Last week, the equity markets logged their longest weekly losing streak in six years due to high oil prices driving up bond yields and inflationary concerns.

The US-Iran situation is critical, with Iran insisting that only diplomacy can solve its conflict with the United States and Israel after President Donald Trump rejected an Iranian proposal. The Strait of Hormuz reopening could ease energy prices and provide relief to India's import bill and the rupee. However, renewed geopolitical tensions could keep volatility elevated.

Crude oil prices have been a focal point for Indian markets since late February, with Brent crude near USD 105-106 a barrel remaining too elevated to provide meaningful macroeconomic relief. Progress in US-Iran negotiations could help reduce the geopolitical premium in oil prices, while renewed escalation or supply disruptions could intensify inflationary pressures.