Indian shares may fall as crude hits $108 on rising Mideast risks

Indian shares were poised for a significant decline at the start of the market on Friday, as the price of Brent crude oil surged to $108 per barrel. This sharp rise in oil prices was due to an escalating Middle East conflict, which had prompted investors to withdraw from risk assets. The Houthis, an Iran-aligned group, had taken control of Yemen's port city of Mocha and continued their advance down the Red Sea coast, targeting strategic islands.

President Donald Trump had earlier indicated that he anticipated the Iran war to conclude following the U.S. midterm elections. The Houthi seizure threatened shipping through the Red Sea, a crucial trade route, while traffic in the Gulf remained restricted due to intensified attacks on tankers. Nifty futures stood at 23,346 points as of 7:18 a.m. IST, indicating a negative opening for the Nifty 50 index, which closed at 23,477.8 on Thursday.

The Nifty and Sensex had dropped by 1.8% and 2.1% respectively that week, foreshadowing their fifth consecutive weekly decline. A flurry of Initial Public Offerings (IPOs), including significant listings from the National Stock Exchange of India and the potentially upcoming Jio Platforms, backed by billionaire Mukesh Ambani, had also adversely affected the markets.

The surge in oil prices heightened inflation risks, driving up global bond yields to unprecedented levels and pressuring equities. MSCI's Asia Pacific index, excluding Japan, experienced a decline of 1.8%. India's susceptibility to higher oil prices was accentuated by the country's reliance on imports to meet its energy needs. Ponmudi R, CEO of stock broker Enrich Money, noted that the sharp increase in crude prices would likely heighten concerns over India's import bill, inflation, and corporate margins, thereby dampening risk appetite.

Foreign investors offloaded Indian shares worth 4.38 billion rupees ($45.89 million) on Thursday, as indicated by provisional data, and had already sold $1.36 billion of shares in September.