Dear Reader,

So much changed last weekend. On Saturday night, Iran unleashed a barrage of drones and missiles against Israel. These were duly neutralised by Israel’s much-touted defence system while its allies did their bit to shoot down the rest. A few did land in Israel causing some damage, but not much.

The world of investing moved to the edge of its seat on Sunday, but by Monday morning, before trading began, nerves had been already calmed. Consider how things appear at noon IST on Monday. Asian stock indices are trading in a range of -0.7 percent to +0.5 percent. Brent is down by 0.5 percent while gold is up by 0.7 percent. That seems a very calm reaction, considering what happened.

Does the outlook for markets and companies change as a result of this conflict, especially if it escalates? In today’s edition, my colleagues Neha Dave, Nitin Sharma and Anubhav Sahu take a close look at what the conflict could mean for oil, as escalation could affect output in Iran and disruption in shipping routes could lead to higher freight costs. The uncertainty could also result in interest rates remaining higher. What do all these factors mean for equities? Answers here.


India is also a key importer of natural gas, a fuel that has increasingly become an important part of the country’s energy basket. Vivek Kelkaranalyses the near-term impact of these developments on natural gas and also its impact on India. He writes: “The Iran-Israel imbroglio will also pose hard near-term questions for India, whose city gas and industrial use, especially across politically sensitive products like ammonia for fertilisers is fast rising with the clear goal of producing all the urea that it needs domestically by 2025. Besides fertilisers, India consumes about 6.7 percent of natural gas, from both domestic and overseas sources, for its energy requirements. The government has a target of 15 percent for natural gas in its energy mix by 2030. India’s natural gas demand is set to grow at about 8 percent annually till 2026.”

What next? Manas Chakravarty writes, “There is only one nation that can put an end to the fighting and that is the United States.” But he also writes that the Biden administration has not restrained Israel’s bombing of Gaza and while it advocates restraint, it continues to supply it with arms. But Biden may try to prevent an Israel-Iran conflict from widening because he has an election to fight against Donald Trump and unsavoury outcomes of a war could weaken his re-election bid. How this plays out remains to be seen. But “the root of the problem is that the US is unwilling to let go of its hegemony and adapt to a multi-polar world”, he writes. There is also a question if economics too is playing a role in its response to the conflict. Read to know more.

The world is trying its best to calm raised tempers and put the conflict to bed. Their success is crucial for markets to return to the state of geopolitical risk that prevailed earlier. Saibal Dasgupta writes in the Eastern Window column, “…it is the domestic political situation in Iran and Israel that would determine the course of the conflict more than any amount of discussion in international forums like the G7 and the United Nations.”

Investing insights from our research team

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Technical Picks: GAIL, Tata Steel, Navin Fluorine, and Gold Bees (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan
Moneycontrol Pro