Global markets opened the week on a cautious note as renewed concerns over higher interest rates, elevated crude oil prices and uncertainty surrounding the Iran conflict weighed on investor sentiment. Asian equities were largely lower in early trade, while US stock futures also slipped.
For India, the pressure is particularly significant. Higher US interest rates could accelerate foreign portfolio outflows, while expensive crude threatens to push up inflation and increase pressure on the government to revise domestic fuel prices.
Although the proposed three-day bank strike in India has been called off, a series of developments affecting the financial sector continues to keep investors cautious.
Crude oil purchased by India is currently priced at more than $120 a barrel in some markets and grades, increasing concerns that the government may eventually have to allow an increase in petrol and diesel prices.
GIFT Nifty, which closed at 23,237 on Friday night, slipped to around 23,136 in early trade, indicating a weak opening for the Indian market.
The US has rejected Iran's conditional proposal to reopen the Strait of Hormuz within seven days in exchange for the lifting of the naval blockade and the release of frozen Iranian assets.
US President Donald Trump has indicated that talks could continue, but crude oil prices resumed their upward move on Monday.
Crude, which had touched around $108.80 a barrel last week, was trading near $106 in early trade.
The US and its allies have managed to increase the movement of oil tankers through the Strait of Hormuz, reducing fears of a complete shutdown of one of the world's most important energy corridors.
Earlier projections that crude could surge to $150 a barrel if Hormuz remained closed have so far not materialised.
According to US military estimates, oil flows through the Strait have recovered significantly, helping keep crude prices below $110 a barrel.
The key developments are:
Tanker movement through Hormuz has improved
Crude has remained below the feared $150 level
Iran continues to face difficulties moving oil through alternative routes
Caspian Sea and overland routes have not been sufficient to fully replace Gulf shipments
Iran, meanwhile, is finding it difficult to move sufficient volumes of oil through alternative routes. Transportation through the Caspian region and overland corridors has not been adequate to fully compensate for restrictions in the Gulf.
This has increased pressure on Tehran to seek a diplomatic solution, while Washington appears reluctant to compromise as it currently holds the stronger position around the Strait.
The combination of higher crude prices, geopolitical tensions and the inflationary impact of rising diesel prices is strengthening expectations that interest rates may remain elevated.
The probability of the US Federal Reserve raising rates by another 25 basis points by the end of October has climbed to 65.9%.
Bond prices have fallen sharply in the US and other major economies as investors adjust to the possibility of higher rates.
US Treasury yields have climbed to their highest levels in more than two decades:
Two-year Treasury yield: around 4.92%
10-year Treasury yield: around 5.21%
30-year Treasury yield: around 5.52%
Higher government bond yields increase borrowing costs across the economy, including for companies. This could be particularly challenging for capital-intensive AI companies that rely heavily on debt funding.
The US government's announcement that it would buy back $6 billion worth of bonds has so far failed to reverse the sell-off.
Persistently high bond yields could also encourage investors to move money away from equities, strengthen the dollar and trigger further portfolio outflows from emerging markets. That remains a major concern for India.
Consumer durable manufacturers are expected to raise prices this week.
Expected price increases include:
Air conditioners and deep freezers: 5-10%
Washing machines: 3-4%
Refrigerators: 3-4%
LED televisions: 3-4%
This would be the third round of price increases in the consumer durables segment in 2026.
Tata Motors is also expected to raise prices of commercial vehicles by around 1% in October. The company had already increased prices by 2.5% in June and 1.5% in March.
Despite elevated bond yields, US equities closed higher on Friday, helped partly by expectations that the Strait of Hormuz could eventually reopen and by a temporary decline in crude prices.
For the week:
Dow gained around 0.3%
S&P 500 rose 1.2%
Nasdaq advanced about 2%
On Friday, the Dow Jones Industrial Average jumped 478.64 points, or 0.93%, to close at 51,828.62.
The S&P 500 gained 39.28 points, or 0.51%, to 7,743.41, while the Nasdaq Composite rose 129.34 points, or 0.48%, to 27,068.72.
US stock futures were in negative territory in early trade.
Dow futures: down around 168 points, or 0.32%
S&P 500 futures: down around 20 points, or 0.25%
Nasdaq futures: down around 99 points, or 0.32%
In New York ADR trading on Friday, HDFC Bank gained 0.79% during regular trading and rose another 1.26% in extended trade to $23.30.
ICICI Bank gained 0.14% during the regular session and remained broadly unchanged in after-hours trade at $27.92.
Infosys ended regular trading nearly unchanged before gaining 0.38% in extended trade to $10.54.
Wipro rose 0.61% during regular trading and ended after-hours trade unchanged at $1.65.
European equities closed higher on Friday, with the exception of the French market.
In Germany, surveys showed that rising inflation and weaker income expectations were weighing on consumer confidence.
Asian markets under pressure
Asian equities were mostly lower in early trade on Monday.
Japan's Nikkei initially gained around 1% before giving up its gains
South Korea's Kospi fell around 1.5%
Taiwan's benchmark index declined about 0.45%
Australia's market rose around 0.30%
Indian equities staged a relief rally on Friday, broadly in line with expectations. Realty, automobile, consumer durables and financial stocks led the gains.
NSE shares fell 1.52% to close at ₹1,790.45.
Market breadth on the BSE was almost evenly balanced, with 2,210 stocks advancing and 2,146 declining. On the NSE, 1,924 stocks gained while 1,592 ended lower.
Foreign portfolio investors remained aggressive sellers. FIIs recorded net sales of ₹3,693.93 crore in the cash market on Friday.
Domestic institutional investors, meanwhile, recorded net purchases of ₹2,838.17 crore.
Friday's closing levels:
Sensex: 73,895.74, up 315.20 points or 0.43%
Nifty 50: 23,140.50, up 77.40 points or 0.34%
Bank Nifty: 55,580.40, up 141.90 points or 0.26%
Nifty Midcap 100: 60,906.00, down 84.15 points or 0.14%
Nifty Smallcap 100: 19,715.25, up 30.50 points or 0.15%
Gold prices came under renewed pressure as expectations of higher US interest rates strengthened. Gold had closed Friday up $11.20, or 0.26%, at $4,286.20 an ounce.
In early trade on Monday, however, the metal fell as much as 1.6% to around $4,213.90 before recovering slightly to about $4,222. In Kerala, the price of 22-carat gold remained unchanged over the weekend at ₹1,11,960 per sovereign.
Silver also weakened. After closing at $64.40 an ounce on Friday, it fell around 2.5% to $62.75 in early trade.
Other precious metals were quoted at:
Platinum: $1,742
Palladium: $1,223
Rhodium: $8,675
International rubber prices declined, while prices in Kerala continued to rise. In Bangkok on Friday, RSS-1 was quoted at $286.70 per quintal and RSS-3 at $283.30. In Kerala, RSS-4 climbed to around ₹27,800 per quintal.
Industrial metals ended Friday with mixed trends.
Copper slipped 0.17% to $14,740 a tonne
Aluminium gained 0.55% to $3,268
Lead, zinc and tin moved higher
Nickel declined
Cocoa futures rose 0.52% to close at $5,619 a tonne amid concerns that prolonged dry weather in parts of Ivory Coast could affect production.
Arabica coffee gained 1.18% to $2.786 a pound. Palm oil fell 2.10% to 4,672 Malaysian ringgit a tonne.
The US Dollar Index closed Friday at 101.04 and strengthened further to around 101.09 in early trade.
Currency levels included:
Euro: around $1.1377
Pound: around $1.3225
Japanese yen: around 157.41 to the dollar
Chinese yuan: around 6.71 to the dollar
US Treasury yields continued to rise, with the 10-year yield near 5.207% and the 30-year yield around 5.51%.
The Indian rupee strengthened on Friday, gaining 15 paise to close at ₹95.81 against the US dollar. In the offshore forward market, the dollar was trading around ₹95.85 in early trade.
The Chinese yuan was at around ₹14.27, while the euro traded near ₹109.14.
Crude oil prices fell on Friday but moved higher again in early Monday trade. Brent crude declined more than 2% on Friday to settle at $104.32 a barrel before recovering to around $105.64. WTI crude was trading near $93.11 a barrel.
The renewed rise in crude remains one of the most important risks for the Indian economy because of the country's high dependence on imported oil.
Cryptocurrency markets continued to see sharp swings. Bitcoin climbed to around $86,000 over the weekend before falling back towards $84,000. It was trading above $84,500 in early Monday trade.
Bitcoin: above $84,500
Ether: above $2,690
Solana: above $122
Sensex: 73,895.74 | +0.43%
Nifty 50: 23,140.50 | +0.34%
Bank Nifty: 55,580.40 | +0.26%
Nifty Midcap 100: 60,906.00 | -0.14%
Nifty Smallcap 100: 19,715.25 | +0.15%
Dow Jones: 51,828.62 | +0.93%
S&P 500: 7,743.41 | +0.51%
Nasdaq: 27,068.72 | +0.48%
US dollar: ₹95.81 | down ₹0.15
Gold: $4,286.20 an ounce | up $11.20
Kerala gold: ₹1,11,960 per sovereign | unchanged
Brent crude: $104.32 a barrel | down $2.28