Indian bonds seen under pressure as US-Iran peace talks stall

MUMBAI: Indian government bonds are likely to extend their selling streak on Tuesday, as the absence of a breakthrough in talks between the United States and Iran continues to cloud the outlook for global oil supplies.

The benchmark 6.48% 2035 bond yield is expected to drift within the 6.92%-6.96% range, according to a private-bank trader, after closing at 6.9418% on Friday.

Bond yields move inversely to prices. Market sentiment remains cautious, with a trader noting that “until there is a clear resolution to the US–Iran conflict, oil is likely to remain under selling pressure, which could in turn heighten volatility in bond markets.”

Oil prices climbed further during Asian trading hours, as efforts to resolve the conflict showed little progress and the crucial Strait of Hormuz waterway remained largely closed, restricting the flow of Middle East oil supplies.

US President Donald Trump has expressed dissatisfaction with Iran’s latest proposal, which according to Iranian sources avoids addressing its nuclear programme until hostilities cease and Gulf shipping disputes are resolved.

Trump’s displeasure with the Iranian proposal leaves the conflict deadlocked, with Iran shutting shipping flows through the Strait of Hormuz - which handles nearly a fifth of the world’s oil supplies - and the US retaining its blockade of Iranian ports.

Benchmark Brent crude prices are hovering near $110 per barrel, having surged over 50% since the conflict began on February 28.

Elevated oil prices pose a significant risk for India, which imports nearly 90% of its crude requirements. Higher prices could widen the import bill, stoke inflation, and strain the fiscal deficit.