Fears of a potential US entry into the West Asian war weighed on American markets on Tuesday. Speculation is rife that the US may lead the offensive by deploying bunker buster bombs against Iran’s underground nuclear facilities. Any direct involvement could also lead to regime change in Tehran.
Crude oil prices jumped to $77 per barrel before retreating. Gold climbed close to $3,400 per ounce, while the dollar also strengthened before giving up gains. Currencies such as the euro dropped initially but rebounded later. Asian markets opened lower this morning but recovered later. US futures are currently trading higher. The Indian market is expected to open lower.
US President Donald Trump issued a stark warning, saying Washington could target Iran’s supreme leader and demanded Tehran’s “unconditional surrender”. The G7 summit has declared support for Israel.
In derivatives trade, Gift Nifty closed at 24,802.50 on Tuesday night, dipped to 24,790 in early trade and then rebounded to 24,840 — indicating a weak opening for Indian equities.
European markets fell on Tuesday. A proposed cut in subsidies for solar and wind energy in the US tax bill pulled down companies in those sectors.
The prospect of US military involvement dragged down US markets. Retail sales in May declined by 0.9 percent, worse than the expected 0.6 percent drop — seen by many as a sign of weakening consumer sentiment and a slowing economy.
Markets do not expect the US Federal Reserve to cut interest rates today but anticipate a signal of a rate cut in September. Any deviation from that could trigger fresh selling.
The Dow Jones Industrial Average fell 299.29 points (0.70 percent) to close at 42,215.80. The S&P 100 index lost 50.39 points (0.84 percent) to end at 5,982.72. The Nasdaq Composite slid 180.12 points (0.91 percent) to 19,521.10.
Shares of major tech firms including Tesla and Apple — part of the so-called “Magnificent Seven” — declined by as much as 4 percent.
US futures showed modest gains today, with the Dow up 0.05 percent, the S&P 500 up 0.09 percent and Nasdaq up 0.14 percent.
Asian markets started lower today. Japan’s Nikkei dipped 0.20 percent before climbing to a 0.40 percent gain. Hong Kong indices slipped while Chinese indices rose.
The lack of de-escalation in the West Asian conflict dragged Indian markets lower on Tuesday. All sectors except IT declined. Pharmaceutical stocks fell 1.9 percent after Trump hinted at fresh tariffs on drug imports. Healthcare and metal stocks also took a hit. Mid cap and small cap indices under-performed the benchmarks.
The Nifty dropped 93.10 points (0.37 percent) to close at 24,853.40. The Sensex lost 212.85 points (0.26 percent) to end at 81,583.30. Bank Nifty declined 230.75 points (0.41 percent) to 55,714.15. The Nifty Midcap 100 fell 382.90 points (0.66 percent) to 58,379.30, while the Smallcap 100 dropped 128.85 points (0.69 percent) to 18,420.35.
The broader market trend remained negative: on the BSE, 1,447 stocks advanced while 2,540 declined. On the NSE, 938 stocks rose and 1,946 fell.
Fifty-seven NSE stocks hit 52-week highs while 25 touched new lows. As many as 91 stocks hit upper circuits while 70 hit lower circuits.
Foreign investors made net purchases worth ₹1,616.19 crore in the cash segment on Tuesday, while domestic funds bought ₹7,796.57 crore worth of equities.
Indices including the Nifty will remain sensitive to geopolitical developments and crude prices. If Nifty fails to hold 24,700 support, a slide toward 24,500 is possible. Key support levels today are at 24,815 and 24,715. Resistance is expected around 24,950 and 25,050.
The war in West Asia triggered wild swings in gold prices. On Tuesday, gold surged to $3,404 per ounce before sliding to $3,364. As of this morning, it hovered around $3,380.
In Kerala, the price of gold fell by ₹840 per sovereign on Tuesday, to ₹73,600.
While gold declined, silver continued its rally. It touched $37.31 per ounce yesterday and stood at $37.12 this morning. Increasing industrial demand and tight supply are pushing prices higher, with bulls forecasting a climb toward $40.
Rubber rose 0.37 percent to 163.00 cents/kg on international markets. Cocoa dropped 1.58 percent to $9,940.09 per tonne, coffee declined 2.96 percent, while tea held firm.
The US dollar strengthened on Tuesday, with the dollar index closing at 98.82. It stood at 98.73 this morning. In forex markets, the dollar gained ground. The euro traded at $1.149, the pound at $1.34, and the yen weakened to 145.27 per dollar. Prices of 10-year US Treasury bonds rose slightly, pushing yields down to 4.40 percent.
The rupee weakened on Tuesday, with the dollar gaining 17 paise to close at ₹86.24. China’s yuan dropped to 7.19 against the dollar.
Crude oil prices soared on fears of US involvement in the West Asian conflict. Brent crude jumped over 5 percent to above $77 before retreating. This morning, Brent was trading at $76.50, WTI at $74.95, and Murban crude at $76.26. Natural gas rose 1 percent.
Cryptocurrencies declined. Bitcoin slipped below $104,800 and Ethereum reached $2,525.
