Oil pump jack is seen in entrance of displayed Israeli flag on this illustration taken, October 8, 2023.
| Photo Credit: Reuters
A protracted Israel-Hamas battle might spur oil costs past India’s consolation zone and even when the federal government holds retail gas costs forward of vital elections, wholesale costs could spike and a better import invoice might stress the rupee, in keeping with consultants.
Brent crude oil costs rose over 3% on Monday, crossing $87 a barrel at the same time as fairness markets around the globe, together with India, got here underneath stress as traders turned risk-averse and rushed to secure haven property like gold.
Fears of a wider battle between Israel and Hamas not solely pulled down the NSE Nifty 0.72% or 141.2 factors to 19,512.4, but additionally dragged buying and selling volumes on the NSE to “the lowest in many weeks”, mentioned Deepak Jasani, head of retail analysis at HDFC Securities.
Broad market indices fell greater than the Nifty even because the advance-decline ratio fell sharply to 0.28:1, he added, stressing that the battle is the newest unfavourable set off for markets which might be already fretting about macroeconomic uncertainties in Europe and China, hawkish central banks and rising oil costs.
Also learn: Israel-Palestine battle LIVE updates on October 9
Beyond the short-term impact on markets, Bank of Baroda chief economist Madan Sabnavis mentioned that if the conflict persists for even a fortnight or extra, the oil dynamics will change. Crude oil costs going past $90 a barrel would pose bother for the world financial system in addition to India.
“Iran joining the fray can affect the sea routes and push up transport and insurance costs. Higher crude prices will distort our balance of trade and current account deficit, thus putting pressure on the rupee,” Mr. Sabnavis famous.
For the federal government, there could possibly be fiscal implications. With elections looming in a number of States and for the Lok Sabha in 2024, elevating gas costs could also be an unlikely possibility, however larger prices must be absorbed both by oil advertising companies or the exchequer.
“Retail inflation can still be controlled by the government if it chooses to keep fuel prices unchanged. But wholesale price inflation will increase for sure. Some airlines have already increased fares after ATF price hikes, which is also inflationary,” the economist mentioned.
Export earnings is also hit as Israel buys round $5.5-6 billion of refined petroleum merchandise a yr from India.
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Source: www.thehindu.com
