The markets went into a tailspin on Monday after a United States’ air strike in Iran ratcheted up tensions in the Middle East.
The markets went into a tailspin on Monday after a United States’ air strike in Iran ratcheted up tensions in the Middle East. At 12.00pm, the Sensex had tumbled by 640 points or 1.6 per cent at 40,824 and the Nifty had shaved off 194 points or 1.6 per cent to trade at 12,032, just shy of its intra-day low of 12,027. The broader markets were worst hit, with S&P BSE Midcap index down 2 per cent and Smallcap plunging 1.7 per cent.
Here’s what dragged the markets lower:
US-Iran tensions
The killing of Qasem Soleimani, a top Iranian commander, in the strike ordered by President Donald Trump escalated tensions in the Middle East and raised concerns of retaliation on the part of Iran. The government in Iran has already announced that it will not abide by the uranium enrichment limits under the 2015 nuclear deal, from which the United States had unilaterally withdrawn in 2018. The US President Donald Trump’s subsequent threat of a major retaliation if Iran avenges killing of the military commander further kept the traders on the edge.
Weak Global Markets
The heightened geopolitical tensions had a domino effect on the global equity markets. Stocks, meanwhile, mostly kept falling on Monday. South Korea’s Kospi lost 0.8 per cent, Hong Kong’s Hang Seng Index dropped 0.7 per cent. Japan’s Nikkei 225 weakened by 2.1 per cent on its first trading day of the year after several days of New Year holidays.
Oil On Boil
The flare-up in Iran-US tensions sent the prices of oil surging to six-month peaks as the Middle East is home to some of the world’s leading oil producing countries. Brent crude gained 2.4 per cent to reach $70.24 per barrel. In a related development, gold also touched a near seven-year high as harried investors scurried for the safe the heaven. On the MCX, February gold futures surged 2.3 per cent or Rs 918 to a record high of Rs 41,030 per 10 gram.
Rupee Spiralling Downwards
The rupee nosedived below the 72-mark on the back of rising global oil prices. It had opened 21 paise lower at 72.01 per dollar versus Friday’s close of 71.80 and is currently trading at 72.04 a dollar.
