Domestic stock indices Sensex and Nifty would brace for a sharp volatility on Monday morning, as Iran confirmed attacks by the US on three of its nuclear facilities. Stock investors would take the attacks as a sign of broadening of the Iran-Israel conflict. This past week, the White House suggested US President Donald Trump would decide on Iran attacks in the next two weeks, given there’s a substantial chance of negotiations.
But the fresh strikes raised questions of whether the chances of negotiations were low. The US president insisted that no further attacks on Iran are planned “for now.”
It would now be important for stock investors to track movement of oil prices, which are up for three weeks now. Also, eyes would be on whether Iran would try to close the Strait of Hormuz and attack US military facilities in the Gulf.
“A direct intervention by the US would trigger ramifications which are hard to predict. But it is certainly the case that the US’ role in regime changes in the Middle East does not have a great track record. Such a policy is also in stark contrast to the MAGA agenda on non-interventionism on which Trump campaigned. US direct intervention also, in GREED & fear’s view, would increase the potential for more extreme price moves in terms of oil price spikes and the like,” Jefferies had said in June 19.
Trump in a post on social media platform Truth Social said the US bombed three Iranian nuclear facilities, including Fordow, Natanz, and Isfahan, adding that a full shipment of bombs has been dropped on the key center of Fordow. He added that all US bomber planes were outside Iranian airspace.
In response to US strikes, The Atomic Energy Organization of Iran, as per Tehran Times, assured “the Iranian nation that despite the evil conspiracies of its enemies, with the efforts of thousands of its revolutionary and motivated scientists and experts, it will not allow the path of development of this national industry to be stopped.”
In its GREED & fear note, Jefferies noted oil prices have eased a bit from recent high, as the actions of Israel, combined with the defensive support provided by America in terms of helping to shoot down Iranian missiles, would have constituted reasons for Iran, based on its previous rhetoric, to already have closed the Strait of Hormuz and attacked US military facilities in the Gulf.
“That this has not happened so far is causing markets to assume that Iran has lost the means to do so,” Jefferies said.
All eyes would be on what Iran does next.
“The risk premium on oil is back with a vengeance,” said an energy strategist at Saxo Markets. “If Strait is compromised, $120 oil isn’t out of the question.”
Emkay Global in an earlier note said Iran cannot win any direct war with the US, and the development would expose it to the risk of complete annihilation of nuclear progress and, perhaps, instigate a regime change. Jefferies cited a recent interview of Israeli Prime Minister Benjamin Netanyahu with Fox TV where he made clear that one of his prime goals is regime change.
Emkay Global on Saturday said it remains constructive on India on the back of RBI’s monetary easing and earnings recovery in 2HFY25.
“Valuation comfort has eroded, although prospects of an earnings recovery keep us positive on overall markets. We trim our tech exposure to ‘Neutral’ after the smart recovery, and add Dixon and IndiGo in our model portfolio revamp,” Emkay Global said.
Kotak in a note said the current Iran-Israel conflict could easily descend into another proxy war between economic and military superpowers and prolonged disruption to crude oil supply with disruption to the movement of oil and gas tankers in the critical Strait of Hormuz.
Nifty, Nifty Bank support levels
Ajit Mishra – SVP, Research, Religare Broking in a weekly note said the levels of 24,700 and 24,400 would serve as immediate support for the 50-pack index. He noted that Nifty had approached the upper band of a consolidation range last week and sustained move above the 25,200 level would have confirmed a breakout, potentially opening the door for a rally toward the 25,600–25,800 zone.
In the case of Nifty Bank, supports exists in the 54,000–55,100 zone. The banking index demonstrated resilience last week, driven especially by renewed participation from private banking majors like HDFC Bank and ICICI Bank that had been relatively inactive in recent weeks, Mishra noted.
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