The crude price action is the big news this morning. Prices shot up 25% to well over the $115/bbl mark. As expected, the equity markets are in a tizzy as a result. The Sensex and the Nifty have seen a sharp fall in intra-day trade. The Nifty is now trading at its lowest levels since April 2025. The Sensex too is hovering around its last April levels as Crude surged to its 2022 highs.
What’s the call on the markets now and what should be the strategy ahead? We spoke to a host of market gurus on how they see the markets at the moment and the possible impact going forward.
‘Markets don’t like uncertainty’
Speaking on the bog concerns for the markets at the moment, Nilesh Shah, MD Kotak Mahindra AMC pointed out that “the equity market doesn’t like uncertainty. While India is safe from the direct impact of war (no missiles falling in our backyard), Indians are getting impacted. 9 million Indians work in the Gulf. They send billions in remittances. Oil adversely impacts inflation, CAD and GDP growth. Markets will be watching the events to calculate the adverse impact.”
Crude past $115/bbl a global risk
Siddhartha Khemka, Head of Research (Wealth Management) at Motilal Oswal Financial Services reiterated the risks and said that “this is a risk globally, which is not positive for equities across the world. So, that’s the structural impact that can happen if the crude oil prices remain elevated for an elongated time. Everything depends on how long this war situation continues. So, the difficulty right now is to predict how long this war will continue and how long will the energy prices remain elevated. If it continues to remain at an elevated level for a long period, the risk then could lead to central banks coming in and raising interest rates.”
He pointed out that, “For India, which is heavily dependent on imports, our import bill will go up drastically, at least in the near-term. We don’t know if the war persists and if the crude oil price will continue to remain at an elevated level. So, that’s very difficult to predict right now.”
‘Risk of a global recession’
Given the sharp spike, market veteran Ajay Bagga said that the “oil price hit on Indian GDP, Current account deficit and inflation will be huge given that India meets more than 85% of its crude oil requirements from imports. We expect retail petrol and diesel price hikes. The cooking gas price was already hiked last week for both consumers and commercial users. Jet aviation fuel prices will also go up. Sectors like paints, aviation, autos, tyres, chemicals and all downstream industries using oil derivatives will see further cuts.”
He added that, “given the liquidity squeeze today, anything that can be sold will be sold. With both the US-Israel on one side and Iran on the other remaining adamant, oil could head to $150 within days and could lead to a sharp drop in economic activity and demand . A global recession is a possibility along with increasing social tensions on rising prices and increasing shortages. The only hope is that some sanity prevails and a truce is announced.”
Conclusion
Most market observers have taken a wait and watch approach but do not rule out a further spike in crude prices. They believe that Crude going above $130 per barrel could impact India’s GD and deficit significantly, and this could in turn lead to rate tightening by the RBI.