Potential Impact of Iran-Israel Conflict on Indian Equity and Bullion Markets

India’s equity and bullion markets may face repercussions due to the escalating tensions between Israel and Iran. The ongoing conflict could lead to a knee jerk reaction among market participants, impacting crude oil prices and imposing inflationary pressures on the Indian economy.

The fading expectations for significant Federal Reserve interest rate cuts this year have already put pressure on India’s equity markets. The recent wave of drone and missile attacks by Iran on Israel, in retaliation to an air strike on the Iranian embassy compound in Damascus, could further exacerbate the situation.

Market experts warn that if the conflict escalates, the focus will shift to corporate earnings and the US Fed outlook. Risk assets may see a sell-off while safe-haven assets like precious metals and crude oil could see an uptick in prices.

Analysts predict that oil prices may rise further in response to the conflict in the West Asian region. With the international benchmark (Brent) prices already appreciating by 10 per cent to hit $90 a barrel in the last month, the situation remains tense.

In the bullion market, gold prices are expected to rise as investors seek a safe haven during uncertain times. Volatility is expected, with prices potentially swinging by $100-200 an ounce. Investors are advised to exercise caution while trading in gold due to the heightened geopolitical tensions.