Indian Shares Rally As Middle East Tensions Ease

(RTTNews) - Indian shares rallied on Wednesday, recovering from their steepest drop in six years in March, on signs of easing Middle East tensions.

Oil prices fell below $100 a barrel, the dollar weakened and global bond yields tumbled after U.S. President Donald Trump said he would end the Iran war without reopening the Strait of Hormuz, especially as the conflict looked set to extend beyond his initial four-to-six-week timeline.

Trump said the U.S. could end its Iran military campaign within 2-3 weeks, claiming that Washington had already achieved its core objectives of hobbling Iran's nuclear ambitions and bringing a regime change in the country.

Asserting that Tehran no longer possessed functional defense infrastructure, Trump claimed that the U.S. "will not have anything to do with" what happens next in the Strait of Hormuz" and that other nations that didn't help the U.S. and Israel in attacking Iran can reopen the key shipping lane that supplies 20 percent of the world's oil consumption.

Meanwhile, Iran said no formal peace talks were underway but signaled a wiliness to stop fighting and end the ongoing war if it gets credible guarantees that the attacks will not happen again.

Risk-on sentiment returned to global markets on optimism that the end of the war lead to a pullback by oil prices and ease inflation concerns.

However, analysts said it could take six to eight weeks more for oil flows to normalize. Even if the conflict ends within the indicated timeline, it is believed that infrastructure damage is likely to keep supply tight in the near term.

"The combination of limited tangible diplomatic progress, continued maritime attacks and explicit threats against energy assets keeps supply risks skewed to the upside," LSEG analysts said in a note.

"Even if that peace is here tomorrow, still we will not go back to normal in a foreseeable future," the European Union's energy commissioner told a news conference after a meeting of EU energy ministers.

The benchmark BSE Sensex jumped 1,186.77 points, or 1.65 percent, to 73,134.32, recovering from losses in the previous two sessions.

The broader NSE Nifty index climbed 348 points, or 1.56 percent, to 22,679.40, ending well off its day's highs as fighting in the Middle East continued, and reports suggested that the United States is reinforcing its military presence in West Asia, deploying a third aircraft carrier to bolster its strained naval forces.

The mid-cap and small-cap indexes on the BSE surged 2.3 percent and 3.4 percent, respectively.

The market breadth was strong on the BSE, with 3,828 shares rising while 509 shares declined and 100 shares closed unchanged.

Among the top gainers, SBI, BEL, Adani Ports, IndiGo and Trent soared 4-7 percent.