India bonds may tick lower as oil rises amid US-Iran impasse despite ceasefire extension

MUMBAI: Indian government bonds may face mild selling pressure in early deals on Wednesday as a prolonged U.S.-Iran standoff, despite an extended ceasefire, kept oil prices elevated.

India’s benchmark 6.48% 2035 bond yield is expected to drift in the 6.87%-6.92% range, a private-bank trader said. It settled at 6.8894% on Tuesday.

U.S. President Donald Trump said he would indefinitely extend the ceasefire with Iran to allow for further peace talks, although it was not clear on Wednesday if Iran or Israel, the U.S. ally in the two-month war, would agree.

Oil prices rose, with Brent crude inching closer towards $100 per barrel again, as investors assessed the outlook for U.S.-Iran geopolitical troubles following the extension of the ceasefire.

“Although the announcement of the truce offered some relief, higher oil prices are likely to exert mild selling pressure on bonds,” the trader said.

Trump also said the U.S. Navy would maintain its blockade of Iran’s ports and shore, which Iranian leaders have called an act of war, but there was no immediate reaction from Iran’s most senior leaders.

Shipping traffic through the Strait of Hormuz, which typically transits about 20% of global oil and liquefied natural gas supplies, stayed largely shut.

“The conflict appears to have moved into a prolonged standoff rather than towards a swift or durable resolution, with U.S. leveraging the port blockade to pressure Tehran into a peace deal, or risk further military escalation,” MUFG said in a note.

Higher oil prices are detrimental to India, which relies on imports to meet nearly 90% of its crude needs. These imports constitute around a fourth of its total import bill.