Domestic headline indices Nifty 50 and Sensex started the week in the red, losing psychological marks as the West Asia crisis weighed on sentiment.

At 12:20 PM, Nifty 50 was trading at 22,516.85 points, down 2.59%, while Sensex shed 2.48% and was at 72,687.80 points. All sectoral indices were in the red, reflecting broad-based selling.

Why is the market falling?

The fresh trigger came after US President Donald Trump gave a 48-hour ultimatum to Iran to “fully open” the Strait of Hormuz, a crucial waterway which carries about 20% of global crude oil supply. On the other hand, Iran suggested that it would hit the region’s energy sites if the US and Israel target its power plants. 

Oil prices have gone up by more than 50% this month. Rising crude oil prices increase inflation and raise costs for businesses, which in turn impacts corporate earnings and market sentiment.

The war has now entered its fourth week with no clear signs of easing. The uncertainty is high, and the markets are waiting and watching. This has globally impacted all assets, including stocks, bonds and precious metals.

Crude oil is adding fuel to inflation

The Rupee fell to a record low of 93.84 against the US Dollar and is one of the worst-hit among Asian currencies. A weaker Rupee makes imports more expensive, especially crude oil, which further adds to inflation worries.

Why is gold falling, despite being a safe haven?

Rising oil prices have posed inflation risks globally, and financial markets that were pricing in monetary easing from central banks are now beginning to price in monetary tightening instead. Higher interest rates are negative for asset classes like Gold, which are non-interest-yielding instruments. Moreover, the strength in the US Dollar is an added headwind. Gold was at ₹1,35,141 per 10g today.