File photo. Photograph:( Zee News Network )
India imports much of its crude from the Middle East, and its markets are sensitive to swings in prices, which have rallied this week on fears of a disruption to oil supplies
Indian stocks sank and the rupee weakened on Wednesday, as Iran struck US bases in Iraq. Shares tanked over 240 points in early trade on Wednesday.
The rupee was weaker by 0.27 per cent at 71.9900 against the dollar after hitting its lowest since November 14.
Oil refiner Bharat Petroleum Corp Ltd was the top decliner on the Nifty, falling 2.2 per cent amid the rise in crude, which could hurt margins at refining companies.
Other Asian shares and US Treasury yields also tumbled while gold shot higher.
India imports much of its crude from the Middle East, and its markets are sensitive to swings in prices, which have dipped this week on fears of a disruption to oil supplies.
"For the time being, the biggest risk factor for the Indian economy is the possible closure of Strait of Hormuz - where almost half of the global oil supplies pass through," said Arnob Biswas, head of FX Research at SMC Global Securities in New Delhi.
"Higher oil prices may lead to headline CPI beyond 6.00 per cent in the coming months," he added in reference to the consumer price index.
Brent crude futures were up 95 cents at $69.22 a barrel, after earlier rising to $71.75, their highest since mid-September 2019.
In India, the NSE Nifty 50 index-tracking blue-chip equities were down 0.86 per cent at 11,948.85 by 0350 GMT, while the benchmark S&P BSE Sensex slid 0.75 per cent to 40,564.72. The two indexes plunged nearly 2% on Monday after a spike in crude prices, and the Nifty saw its worst one-day drop in some four months.
Growth in Asia's third-largest economy has already slowed to multi-year lows, and on Tuesday, India forecast 5 per cent growth for the current financial year, the slowest pace in 11 years.
The projections will likely prompt finance minister Nirmala Sitharaman to opt for extra fiscal stimulus when she presents the annual budget next month.