Iran has offered to reopen the Strait of Hormuz if the US eases military pressure and lifts its blockade on Iranian ports, according to reports. News agency Reuters reported, quoting a senior Iranian official, that the Islamic Republic can reopen the critical waterway within seven days if Washington eases military pressure and lifts its blockade on Iranian ports.
Following the report, crude oil prices declined significantly, with Brent crude dropping over 2% to trade near $98 per barrel.
Iran to open the Strait of Hormuz?
A Reuters report indicated Tehran’s willingness to open the Strait of Hormuz on the condition that the US ease its military pressure.
The report further stated that Tehran’s proposal was delivered to the US via intermediaries on September 16. The details of an agreement to end the US-Iran conflict can be discussed in New York through mediators, the Iranian official told Reuters.
On Sunday, Iran had threatened strong retaliation to any military attack on it after its military central command said it had learned that the US was preparing to restart military operations with the support of regional countries.
How can the reopening of the Hormuz Strait impact the Indian stock market?
The Strait of Hormuz is a critical waterway that carries a significant share of the world’s energy supplies. Through this narrow waterway, which connects the oil-rich Persian Gulf to the Indian Ocean, about 20 million barrels of oil per day – roughly one-fifth of global consumption – and around one-fifth of global LNG trade, take place.
The reopening of this critical waterway can drive oil prices significantly lower, providing major macroeconomic relief for India, the world’s third-largest importer of crude oil.
Experts believe a significant fall in crude oil prices can trigger a trend reversal in the Indian stock market, which has been rangebound lately.
“Iran’s opening of the Strait of Hormuz will be a major positive for the domestic market. Key indices may see a healthy upswing, breaking their consolidation phase,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments.
Ajit Mishra, SVP of Research at Religare Broking, also has a similar view.
“The domestic market may see a healthy upside if the Strait is opened. Iran itself has proposed to open it if the US eases its pressure. Positive development in this direction can help the market come out of the consolidation,” said Mishra.
Mishra, however, added that for a sustained uptrend, oil prices will have to fall below $90 per barrel and remain low.
Nifty has been in the red for the last two years. Year-to-date, the index is down nearly 11%.
Impact on gold prices
A drop in oil prices due to the reopening of the Strait of Hormuz will ease inflation fears and dim prospects for further monetary tightening by the US Federal Reserve and other major global central banks. This will be a key positive for gold prices.
“A fall in oil prices will remove the fears of rate hikes, which can drive gold prices higher. On the MCX, gold prices can rise to ₹1,53,000- ₹1,54,000 per 10 grams. For the prices to sustain gains, it has to close above ₹1,54,000,” said Anuj Gupta, a SEBI-registered research analyst.
Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said markets will closely watch Trump’s UN speech, Xi Jinping’s US visit and developments around the Strait of Hormuz.
“Gold is likely to remain volatile amid these geopolitical triggers. Gold range can be seen between ₹1,51,000– ₹1,54,500,” said Trivedi.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
