Indian shares eye muted start as oil climbs on intensifying Mideast tensions

Indian shares are expected to open unchanged on Wednesday, as market sentiment remains cautious due to heightened tensions in the Middle East and a surge in Brent crude oil prices nearing $100 per barrel. The conflict escalated on Tuesday when Houthi rebels in Yemen targeted several Saudi cities, drawing the United States into the fray, while US forces attacked Iranian oil tankers, and Iran retaliated by striking a US base in Jordan.

Brent crude futures surged 1.5% to $99.5 per barrel. This spike in oil prices could exacerbate India's trade deficit, fuel inflation, and impede growth, given that the country relies heavily on imported energy. As of 7:46 a.m. IST, the Nifty 50 index was trading at 23,652.5 points, suggesting a subdued opening for the index, which closed at 23,635.1 the previous day.

The BSE Sensex also experienced a decline of 2.2% over the past seven sessions, closing lower in six out of the seven trading days. Both indices reached their lowest levels since June 12 on Tuesday. Globally, investors are closely monitoring US inflation data expected later in the week, as this will inform the Federal Reserve's rate decision for the following week.

Rising US interest rates pose a challenge for emerging market equities, as they could discourage foreign investment while making the dollar and government bonds more appealing under tighter monetary conditions. On Tuesday, foreign investors sold Indian shares worth 1.23 billion rupees ($12.97 million) based on provisional data. So far in September, they have offloaded $1.33 billion worth of shares.