Indian shares set to open lower as Middle East tensions raise inflation worries

Indian shares are expected to open lower on Tuesday as tensions in the Middle East continued to unnerve sentiments, lifting crude oil prices to a one-month ​high and raising inflation worries.

The US military carried out a third consecutive ‌night of strikes against Iran on Monday as President Donald Trump reinstated a blockade of Iranian shipping and proposed charging a 20% fee to guard the Strait of Hormuz.

GIFT Nifty futures were trading at ​24,058.5 as of 7:49 a.m. IST, indicating the Nifty 50 (.NSEI), opens new tab could open ​below Monday’s close of 24,211.

Brent crude briefly surpassed $85 per barrel on Tuesday - ⁠its highest since the U.S. and Iran signed a memorandum of understanding to ​end the war on June 17 - as the two countries stepped up attacks in the ​Strait of Hormuz, heightening uncertainty about energy flows.

Higher crude oil prices can lead to a rise in India’s import bill, fiscal deficit, inflation and hit corporate margins, as the country imports the majority ​of its energy requirements.

India’s retail inflation breached the Reserve Bank of India’s target for ​the first time in 17 months, government data showed on Monday, setting the stage for interest rate ‌hikes.

“With ⁠inflation now exceeding the RBI’s 4% target, the recent surge in crude oil prices has intensified concerns over imported inflation, posing a key headwind to India’s inflation outlook and the broader macroeconomic environment,” said Ponmudi R, chief executive officer of Enrich Money.

The escalating ​Middle East conflict ​propelled foreign investors to ⁠end an eight-session buying streak on Monday, offloading Indian shares worth 30.62 billion rupees ($320.23 million).

Stocks in Asia swung between gains and ​losses on Tuesday.