Conflicts vs elections: Navigating the markets in stormy waters
Markets always tend to climb a wall of worry. And in 2024, investors are grappling with abundant worries. Alongside the looming elections, they now must contend with a fresh geopolitical outbreak in the Middle East. Despite this, most international markets are trading within 5% of their all-time highs.
Recent weeks have been dominated by news of strife and armed conflicts. This has led to jitters in foreign flows into Asian equities, impacting India as well. Approximately Rs 25,000 crore has been pulled out by foreign institutional investors from Indian equity markets in April so far.
As history suggests, uncertainty has given a boost to gold prices, which have risen by more than 16% this year. The US Dollar Index has also retraced to levels upwards of 106+, on expectations of interest rates remaining higher for longer.
Now, the world waits with dread to see what Iran and Israel might do next, and how much the war may potentially escalate, given the importance of the Strait of Hormuz.
The narrow passage, which runs between Oman and Iran, handles almost 20 million barrels a day, accounting for nearly 30% of world oil trade.
All LNG exports from Qatar and the UAE also transit through the SoH, accounting for 20% of global LNG trade, according to the International Energy Agency (IEA).
This brings us to oil price – a big risk for India as it is a major crude importer. India imported 232.5 million tonnes of crude oil in FY24 and its import dependence on crude oil soared to 87.7%, up from 87.4% in FY23. With all
