Dalal Street Faces Tense Week Amid US-Iran Conflict, Inflation Worries

Dalal Street is likely to face another tense week as the US-Iran conflict, foreign investor activity, crude oil prices, inflation worries and a falling rupee are expected to drive market movement.

According to analysts, investor sentiment is expected to remain under pressure after the rupee fell below the 96 mark against the US dollar on Friday, hit by rising crude oil prices and inflation concerns.

"Participants will closely monitor developments in the ongoing US-Iran conflict and their implications for crude oil prices, inflation, and global risk sentiment. Movements in energy markets and the rupee will continue to influence near-term market direction," said Ajit Mishra, SVP, Research, Religare Broking Ltd.

The ongoing conflict between the US and Iran is likely to remain a major trigger for markets, with investors closely watching any changes in tensions, diplomatic talks and global energy prices.

"Markets are expected to remain highly volatile and intensely headline-driven, with investor sentiment continuing to hinge on developments surrounding the ongoing US–Iran conflict, diplomatic negotiations and movements in global energy markets," Ponmudi R, CEO - Enrich Money, an online trading and wealth tech firm told PTI.

He said markets will be especially sensitive to any developments related to the Strait of Hormuz because of its key role in global energy supply.

"Any credible diplomatic progress or easing in tensions could trigger short-covering rallies across equities, support emerging market sentiment and help moderate crude oil prices. Conversely, any renewed escalation, disruption to shipping routes or deterioration in negotiations could rapidly revive risk-off positioning, intensify volatility and place renewed pressure on equities, currencies and commodities globally," Ponmudi added.

Brent crude has already climbed to $109 per barrel, adding to inflation worries and increasing pressure on markets.

Apart from geopolitical developments, investors will also track rupee movement, foreign institutional investor trends and global markets for further direction.

Santosh Meena, Head of Research at Swastika Investmart Ltd, said geopolitical tensions and crude oil prices will remain the key focus areas in the week ahead.

He added that investors will also watch important economic data from China, the US and India, along with the minutes of the US Federal Open Market Committee (FOMC) meeting.

The final phase of the earnings season is also expected to keep stock-specific action active, with IOC, BPCL, GAIL and NTPC set to announce their quarterly results this week.

Last week, markets saw heavy selling pressure. The BSE Sensex fell 2,090.2 points, or 2.7%, while the NSE Nifty dropped 532.65 points, or 2.2%.