India's share benchmarks slip as Mideast peace deal hopes ebb

India’s equity benchmarks fell on Tuesday as fresh U.S. strikes on Iran dampened hopes of an imminent peace deal to end the three-month-long Iran war that has upended the inflation and growth outlook for Asia’s third-largest economy.

The Nifty 50 fell 0.49% to 23,913.7 and the BSE Sensex lost 0.63% to 76,009.7. The indexes rose to two-week highs a day earlier after U.S. President Donald Trump claimed that Washington and Tehran had “largely negotiated” a memorandum of understanding on a peace deal.

Since then, the U.S. struck Iran and U.S. Secretary of State Marco Rubio said negotiating a deal could “take a few days”.

The uncertainty over a peace deal pushed Brent crude futures up 3.3% to $99.35 per barrel.

“Although a few ships have traversed Hormuz in recent days, there is still considerable uncertainty about how (and) when the Strait of Hormuz will return to its normal pre-war operations,” HSBC said in a note.

The Strait of Hormuz carried about a fifth of the world’s oil before the Iran war broke out.

India, the world’s third-largest oil importer and consumer, has been reeling under the effect of rising crude prices and supply disruptions.

On Tuesday, twelve of the 16 major sectors fell, with heavyweight financials leading losses with a 0.7% decline.

The broader small-caps and mid-caps rose 0.4% and 0.5%, respectively.

While benchmark Nifty 50 and Sensex have fallen 8.5% and 10.8% so far this year, small-caps and mid-caps have risen 3.1% and 3%, respectively.

The outperformance of the broader markets has been supported by improving domestic liquidity, earnings recovery expectations and “normalisation in valuations after the earlier phase of excesses”, Chandraprakash Padiyar, senior fund manager at Tata Mutual Fund, said.

Among shares, Gujarat Mineral Development Corp jumped 5.7% after the Quad nations announced a critical minerals framework.