How US-Iran peace deal impacted oil prices, stock markets, gold and the rupee

Global financial markets reacted sharply on Monday (June 15) after US President Donald Trump announced the completion of a peace deal with Iran and the reopening of the Strait of Hormuz, a vital energy corridor that carries nearly a fifth of the world’s oil supplies.

Crude oil prices tumbled as fears of supply disruptions eased, while Indian equity benchmarks rallied on expectations of lower inflation and reduced import costs. Bullion prices rebounded after last week’s sharp correction, aided by a weaker dollar and hopes of lower interest rates, while the rupee strengthened against the greenback as falling oil prices improved India’s macroeconomic outlook.

Crude oil prices tumble

Brent crude fell more than 4 per cent to $83.75 a barrel, while US West Texas Intermediate (WTI) crude dropped nearly 5 per cent to $80.87 a barrel, extending losses from the previous session. At one stage, WTI came close to slipping below the $80 mark.

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Domestic markets mirrored the global trend, with crude oil futures on the Multi Commodity Exchange (MCX) falling 5.32 per cent to ₹7,544 per barrel.

Analysts said the domestic benchmark has now slipped to its lowest level since March 11, when it was at ₹7,558 per barrel. "MCX Crude oil declined by around 5 per cent, with the broader trend remaining moderately bearish after reports of a US-Iran agreement raised expectations of increased energy exports and improved global oil supply," Kaveri More, Commodity Technical Analyst At Choice Broking, told PTI.

Oil prices had surged to as high as $120-125 a barrel during the conflict, compared with around $70 before the war began, as fears over disruptions to shipping through the Strait of Hormuz rattled energy markets. The ceasefire announced in April and subsequent hopes of a peace deal had already prevented further spikes.

The reopening of the strait is expected to pave the way for the resumption of normal commercial traffic and oil imports, particularly for Asian economies heavily dependent on Gulf supplies. Additional support for lower prices has come from OPEC’s decision earlier this month to raise production quotas from July.

Normalcy may take time

However, analysts cautioned that the return to normalcy would not be immediate. Andrew Lipow of Lipow Oil Associates told the BBC that mines in the waterway would first have to be cleared, a process that could take anywhere from a few weeks to six months. He added that a large backlog of tankers was waiting to transit the strait and that restoring production and loading operations to normal levels would take time.

Admiral Mark Montgomery, a retired US Navy rear admiral and senior fellow at the Foundation for the Defence of Democracies, said the recovery in oil flows would not happen overnight.

"I would say that’s going to take a month or 45 days to kind of fully get till you're at a normal pumping balance, and vessels moving in and out smoothly," he told the BBC's Today programme.

Rajesh Palviya, Head of Research at Axis Direct, told PTI, "Brent crude, already under pressure after last week's sharp decline, is likely to remain subdued, which is a significant positive for India's macroeconomic outlook through lower inflationary pressures and a reduced import bill."

Indian stocks surge higher

Indian equity benchmarks ended significantly higher, as easing geopolitical tensions in the Middle East and a decline in crude oil prices triggered broad-based buying across sectors, particularly in autos, realty, financials and consumer-focused stocks.

The BSE Sensex closed at 76,264.33, up 736.38 points or 0.97 per cent, after touching an intraday high of 76,821.07. The NSE Nifty 50 settled at 23,853.90, gaining 231 points or 0.98 per cent. Although both indices pared a part of their early gains, they managed to end firmly in positive territory.

The rally extended beyond frontline indices, with broader markets also participating in the upmove.

The Nifty 500 gained 1.29 per cent, Nifty Midcap 100 advanced 1.29 per cent, while the Nifty Smallcap 100 rose 1.11 per cent. The Nifty Total Market index climbed 1.31 per cent, reflecting healthy participation across market capitalisations.

Market volatility eased further, with India VIX declining 2.48 per cent to 14.35, indicating reduced risk perception among investors.

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Among Sensex and Nifty constituents, Trent emerged as the top gainer, soaring 5.40 per cent. InterGlobe Aviation (IndiGo) rose 3.62 per cent, while Bajaj Finserv gained 3.54 per cent.

Eternal, UltraTech Cement, Maruti Suzuki, Mahindra & Mahindra and Larsen & Toubro advanced between 2.9 per cent and 3.1 per cent. Reliance Industries gained 1.13 per cent, providing support to benchmark indices.

Among laggards, NTPC fell 1.48 per cent, ICICI Bank declined 1 per cent, while Asian Paints, Hindustan Unilever and Sun Pharma ended lower.

Global equities join rally

Lower oil prices and hopes of peace sparked strong buying across Asian equities. Japan’s Nikkei 225 benchmark index soared 5.5 percent in morning trading on Monday, while South Korea’s Kospi jumped as much as 5.7 percent.

Taiwan’s Taiex climbed as much as 2.7 percent, while the ASX200 in Australia rose about 1.5 percent. In Hong Kong, the Hang Seng Index rose about 1 percent, before giving up most of its gains later in the morning.

Futures for US stocks, which are traded outside of regular market hours, also climbed, with those tied to the benchmark S&P500 and the tech-focused Nasdaq Composite rising about 1 percent and 1.8 percent, respectively.

Gold rebounds after correction

Gold prices bounced back in futures trade on Monday, going up by Rs 2,242 to Rs 1.52 lakh per 10 grams.

On the Multi Commodity Exchange, the yellow metal for August delivery jumped Rs 2,242, or 1.49 per cent, to Rs 1,52,770 per 10 grams in a business turnover of 8,948 lots.

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Last week, gold futures declined Rs 5,066, or 3.2 per cent, to settle around Rs 1.5 lakh per 10 grams.

Analysts said the recovery came after the precious metal witnessed a sharp correction last week.

In overseas trade, Comex gold futures for August contract rose USD 91.04, or 2.15 per cent, to USD 4,329.84 per ounce in New York. The yellow metal fell nearly 3 per cent, during the past week to close at USD 4,238.8 per ounce.

"Gold prices surged more than 2 per cent in global markets on Monday," Manav Modi, Commodities Analyst at Motilal Oswal Financial Services Ltd, told PTI. The prospect of increased oil supplies pushed crude prices lower, easing fears of energy-driven inflation that had dominated markets for months, Modi said. Lower rate expectations, softer Treasury yields, and a weaker dollar supported bullion prices, he added.

Surge in silver prices

Silver prices rallied by Rs 6,066 to Rs 2.52 lakh per kilogram in futures trade on Monday as easing geopolitical tensions in West Asia and a weaker US dollar improved sentiment in the bullion market.

On the Multi Commodity Exchange, the white metal for July delivery surged Rs 6,066, or 2.46 per cent, to Rs 2,52,252 per kilogram in a business turnover of 11,420 lots. In the past week, silver fell Rs 2,351, or nearly 1 per cent, to Rs 2.46 lakh per kg.

In the international markets, Comex silver futures for July contract rose USD 2.39, or 3.53 per cent, at USD 70.37 per ounce in New York. The metal last week declined nearly 2 per cent to close at USD 67.97 per ounce.

Renisha Chainani, Head of Research at Augmont, told PTI that the announcement pushed the US dollar to a more than one-week low, making dollar-denominated bullion cheaper for holders of other currencies, while crude oil prices retreated drastically.

Rupee gains against dollar

The rupee rose 58 paise against the greenback to 94.60 in early trade, its strongest level since May 8, compared with Rs 95.11 in the previous session. A strong start to the day at the domestic equity markets and a weaker US dollar further drove the local unit, forex traders said.

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At the interbank foreign exchange, the rupee opened at 94.70 against the US dollar before rising further to 94.60, up 58 paise from its previous close.

"Rupee movement today will be significantly influenced by the peace deal between US and Iran and the consequent crash in Brent crude. This means India's balance of payments problem for FY27 is no longer a serious issue," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said.

"Rupee started appreciating from the low of 96.96 to the dollar touched on May 20. Today the appreciating trend will continue and the rupee is likely to trade in the 94.80 to 94.60 range with scope for further appreciation in the coming days," he added.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.53, down 0.22 per cent.