Stock markets to react negatively amid escalating crisis in Middle East

New Delhi: Stock markets will react negatively on Monday due to the escalating crisis in the Middle East, and the impact on equities will depend on how long the conflict lasts, analysts said.

The US and Israel attacked Iran on Saturday. Iranian state media confirmed early Sunday that Iran’s Supreme Leader Ayatollah Ali Khamenei was killed in the attack.

Besides, geopolitical situation, macroeconomic data announcements, global market trends, and trading activity of foreign investors would also influence investors’ sentiment in a holiday-shortened week ahead.

Sentiment has turned even more fragile after fresh geopolitical escalations over the weekend in the Middle East, Santosh Meena, Head of Research at Swastika Investmart Ltd, said.

“For an oil-importing economy like India, sustained elevated crude prices pose risks to inflation, fiscal balance, and rate-cut expectations. This external shock has emerged at a technically vulnerable moment for the market,” Meena said.

Looking ahead to Monday’s trade, markets are likely to open with a cautious to negative bias amid geopolitical overhang and elevated crude prices, he noted.

“Investors will simultaneously react to Q3 GDP data and monthly auto sales figures, while upcoming IIP and PMI numbers will further shape domestic macro expectations.

“Globally, key economic releases from the US and China, along with the trajectory of crude prices, will influence risk appetite. The direction of FII flows will remain the primary driver for index movement in the near term,” Meena added.

Brent Crude, the global oil benchmark, jumped 2.87 per cent to $72.87 per barrel.