- Shares fall as Middle East conflict raises crude prices
- Oil explorers gain as crude prices boost profitability
- Indian rupee depreciates, bond yields rise
- War risks India's economic growth, inflation balance - analysts
- Strait of Hormuz closure affects India's crude imports
March 2 (Reuters) - Indian shares tumbled on Monday as the Middle East conflict pushed crude prices higher and triggered a flight to safe havens, weighing on investor sentiment.
The Nifty 50 dropped 1.2% to 24,878.1 while the BSE Sensex shed nearly 1.22% to 80,294.31 by 10:10 a.m. IST, after opening sharply lower by around 2.1% and 3.4%, respectively.
The Indian rupee depreciated against the dollar and government bond yields rose after U.S. and Israel strikes on Iran heightened fears of a protracted Middle East conflict and dampened risk appetite in financial markets.
The Indian economy has seen strong growth and low inflation for the past year but a jump in oil prices and disruption in shipping routes could risk tipping the balance, analysts said.
"For India, with close to 90% dependence on imported crude, any sustained rise in Brent prices quickly feeds into higher fuel costs, broader inflation, and a wider current account deficit," said Rajeev Sharan, head of criteria, model development and Research at Brickwork Ratings.
"This complicates the RBI's disinflation path and could delay rate cuts. The conflict premium will ease only when there is assurance that vital oil routes such as the Strait of Hormuz remain open," Sharan said.
The Strait of Hormuz, a vital chokepoint between Oman and Iran linking the Persian Gulf to the Arabian Sea, saw Tehran close navigation, likely disrupting nearly 20% of global oil flows and more than 40% of India's crude imports.
Following U.S.-Israeli strikes that killed Iran's Supreme Leader Ali Khamenei, Brent crude prices hit $82.40 a barrel, their highest in 14 months, before paring gains to trade 6% higher at $77.20 per barrel as of 10:10 a.m. IST.
BROAD-BASED LOSSES
Fifteen of the 16 major sectors logged losses. The broader small-caps and mid-caps fell 1% each.
Shares of oil marketing companies, paint and tyre makers, aviation companies and chemical manufacturers slipped as crude oil prices rose.
Among stocks, Larsen and Toubro fell 5.2%. The company said that the Middle East is a strategically significant market, citing its long-standing presence across energy, infrastructure, renewables and technology sectors.
"India's economic links with the Middle East are strong, with the region taking 17% of India's exports and providing 55% of its crude oil and 38% of worker remittances," brokerage house Jefferies said in a note on Monday.
Contrary to the broader market, oil explorers such as ONGC and Oil India rose about 0.5% each, benefiting from higher crude prices that boost revenue and profitability.
Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sherry Jacob-Phillips and Mrigank Dhaniwala
Source: Reuters