Indian Shares Seen Lower At Open Amid Iran-US Standoff, Fed Hike Bets

(RTTNews) - Indian shares look set to open a tad lower on Monday amid continued uncertainty over the end to the U.S.-Iran war in the Middle East.

Brent crude prices remain elevated, rising nearly 2 percent to trade above $106 a barrel in early Asian trade after U.S. President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz and other demands, and reportedly told aides he expects U.S. bombing to resume after midterm elections.

While Trump said he expects negotiations to resume this week. Iran said it would not soften its conditions.

Iran's Foreign Minister Abbas Araghchi expressed hopes for a diplomatic solution, but warned the country is prepared for war with the United States to resume.

"We are fully prepared for the war to be resumed. We stand firm in the face of any new aggression, even if it comes to a doomsday war," Araghchi told NBC News.

Rising U.S. Treasury yields may also keep investors on edge after several Federal Reserve officials flagged more tightening ahead, citing resilient economic growth and a strong labor market.

Cleveland Fed President Beth Hammack said on Friday that "the biggest risk with inflation is the formation of an inflationary mindset and the public has been dealing with above-target inflation for an extended period."

Investors are pricing in another interest rate hike from the Federal Reserve before year-end.

Benchmark indexes Sensex and Nifty posted modest gains on Friday but logged their longest weekly losing streak in six years as investors reacted to elevated oil prices, surging U.S. Treasury yields and IRDAI's proposal on insurance commissions.

Given the shortened trading week and the September derivatives monthly expiry scheduled for Tuesday, the coming week is likely to remain volatile.

Asian markets were mixed this morning, with South Korea's Kospi falling over 2 percent as trading resumed after a holiday.

The U.S. dollar index held near a two-month high while gold tumbled 1.6 percent toward $4,200 an ounce.

U.S. stocks closed higher on Friday and notched their first weekly gain in the last three as oil prices pulled back on reports about a potential deal to end the prolonged U.S.-Iran conflict, helping ease pressure on Treasury yields that had recently surged to multi-decade highs.

It was said that Iran has submitted a proposal to the U.S. to end the war and reopen the Strait of Hormuz within seven days if Washington accepts its conditions.

The yield on the 10-year Treasury briefly jumped to 5.22 percent earlier in the day after a survey showed U.S. consumer sentiment has fallen to a four-month low in September due to rising inflation fears, with year-ahead inflation expectations rising to 4.6 percent in September, the highest reading since June and up from 3.4 percent before the Iran conflict began.

The S&P 500 rose half a percent to snap a three-day losing streak. The Dow advanced 0.9 percent and the tech-heavy Nasdaq gained half a percent.

European stocks ended broadly higher on Friday and notched their first weekly gain in a month after reports suggested the U.S. and Iran were moving closer to an agreement regarding naval blockades and easing economic measures.

The pan-European STOXX 600 rose 0.4 percent. The German DAX climbed 0.6 percent and the U.K.'s FTSE 100 inched up 0.1 percent while France's CAC 40 finished marginally lower.