The effects of Middle East tensions on oil prices
This week, developments in the Middle East tensions, particularly their impact on oil prices and various assets like U.S. Treasuries and the dollar, will steer the direction of the Indian rupee and government bonds.
Over the weekend, Iran’s direct assault on Israel has heightened concerns of a broader conflict. Israeli Prime Minister Benjamin Netanyahu asserted on Sunday his nation’s determination to secure victory following reports of intercepting nearly all hostile drones and missiles launched by Iran.
Asia’s response to the escalating tensions in the Middle East has been restrained thus far. Oil prices saw a slight decrease, the typically safe-haven dollar experienced a dip, and U.S. equity futures showed slight gains, while U.S. Treasury yields climbed.
According to a treasury official from a bank, “The pivotal factor influencing the rupee and Indian government bond yields will be oil, with the crucial question being whether Israel will retaliate.” The prevailing market sentiment appears to suggest skepticism about immediate Israeli retaliation, judging by the reactions observed thus far.
