Middle East unrest: Rupee may fall; Oil pricier in early Asian trading

The India Rupee could take an unprecedented downward dive on October 4, currency traders speculate, with foreign investors turning cagey about putting their money in domestic equities amidst ongoing unrest in the Middle East.

Global economies are apprehensive of a hit following Iran’s ballistic missile strike on Israel earlier this week in retaliation against an Israeli attack on Lebanon. A direct fallout was a rise in oil prices during the early Asian trading hours on October 4.

In sync with global trends, analysts anticipate tension in the Middle East could also have an effect on India. A report in The Squirrels earlier this week had noted that chances of a potential rate cut by the Reserve Bank of India (RBI) in October 2024 now appears slim following the Iranian strike on Israel and given the apprehension of an Israeli counter-strike, especially on Iranian oil properties. Although India’s GDP growth has been robust in recent years, the Middle East unrest could mean the RBI may not consider a rate cut before the second half of the fiscal year 2024-’25, or H2FY25. The impact could be more immediate on the value of the rupee, experts feel.

OIL PRICES UP IN EARLY ASIAN TRADE

Oil prices surged during the early Asian trading hours on October 4, with the industry fearing crude oil supplies from the Middle East could be disrupted globally amidst the ongoing tension. Brent crude futures rose 9 cents to hit $77.71 a barrel, at 0.12 per cent. US West Texas Intermediate crude futures surged 8 cents to reach $73.79, at 0.11 per cent.

More than 30 per cent of the world’s oil supplies are from the Middle East, though the Organization of the Petroleum Exporting Countries (OPEC) has the capacity for extra production, if needed.

GULF ARAB STATES ASSURE NEUTRALITY

Meanwhile, the Arab states of the Gulf have reassured Iran of their neutrality amidst the nation’s ongoing conflict with Israel, Reuters reports. With chances of Israel attacking Iranian oil properties high, Ministers of the Gulf Arab states and Iran, at a meeting hosted by Qatar, discussed de-escalation, according to the news website Axios.