The stock market fell about 1% on Monday after United States President Donald Trump on Sunday announced a blockade of the strategic Strait of Hormuz after talks with Iran collapsed.
The blockade, which will take effect at 7.30 pm Indian time on Monday, is expected to further disrupt oil and gas supplies.
The benchmark Sensex index had fallen by more than 700 points, or 0.9%, when the session ended. This was a recovery from a fall of more than 1,500 points, or 2%, when trading for the day had begun. The Nifty had sunk by more than 200 points, or 0.8%, at closing.
The stock market had risen more than 4.5% in the past week after Washington and Tehran on Wednesday agreed to a two-week ceasefire to allow further negotiations to end the conflict.
On Monday, the India VIX index, which measures volatility in the market, spiked 8%.
Major Asian stock indices also traded lower on Monday. As of the close on Monday, Hong Kong’s Hang Seng index was down 0.9%, South Korea’s Kospi had crashed 0.8%, Japan’s Nikkei 0.7% and China’s Shanghai Composite 0.06%.
Oil prices rise, rupee tumbles
Oil prices increased sharply following Trump’s announcement of a naval blockade of Iran.
The benchmark Brent crude rose about 6% on Monday to reach $102 per barrel. The price was $78 per barrel on February 27, a day before the conflict started.
Ahead of peace talks on Friday, Brent for June delivery had fallen 0.8% to $95.2 per barrel, AP reported.
The rise in crude oil prices also weighed on the rupee, which fell 65 paise during the day to end the session at 93.3 against the US dollar. The Indian currency had closed at 92.7 against the US dollar on Friday.
The currency had gained 0.4% last week, building on a nearly 2% rise the week before, Reuters reported.
The US and Israel launched an attack on Iran on February 28, claiming that Tehran’s action posed an existential threat to Israel. Washington acts as a guarantor of Israel’s security.
Iran retaliated by striking Israel and US military bases in the region and targeting major cities in Gulf countries.
Tehran also effectively blocked the Strait of Hormuz, the narrow waterbody connecting the Gulf to the Arabian Sea, for most international commercial vessels, triggering a global energy crisis.
About 20% of global petroleum supply passes through the maritime chokepoint.
Washington and Tehran had on Wednesday agreed to a two-week ceasefire to allow further negotiations to end the conflict. However, peace talks that were held in Islamabad collapsed without an agreement on Sunday.
Follow top updates from the war in West Asia here.
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