At the start of trading on Thursday, Asian stock markets experienced a wave of anxiety, with many indices showing a decline as investors grew increasingly concerned about the possibility of the United States getting involved in the escalating conflict between Israel and Iran.
This geopolitical stress drove investors toward safe-haven assets such as gold and the Japanese yen, leading to a predicted drop for Indian benchmarks like the Sensex.
The market’s cautious attitude was largely shaped by comments from US President Donald Trump, who left observers uncertain about potential military actions against Iran’s nuclear facilities.
While speaking to the press outside the White House, Trump remarked, “I may do it. I may not do it.”
This uncertainty only added to the market’s jitters. In a report by The Wall Street Journal, it was highlighted that Trump had indicated to senior advisors that he approved plans for strikes on Iran but was waiting to see if Tehran would change its stance on its nuclear ambitions.
“Traders are feeling anxious and unsure,” said Kyle Rodda, a senior market analyst at Capital.com.
“There’s rampant speculation—likely stirred by the Trump administration—that US intervention may occur, which could significantly escalate tensions and provoke retaliation from Iran.”
Rodda further cautioned, “Such developments could lead to a larger regional conflict, affecting global energy supplies and economic growth.”
This geopolitical uncertainty influenced stock movements across the region. Japan’s Nikkei index fell by 0.8%, driven down further by a stronger yen, which negatively impacts the revenues of major exporters.
Taiwan’s stock index dropped by 0.9%, and Hong Kong’s Hang Seng index decreased by 0.8%.
Futures for the US S&P 500 indicated a decrease of 0.4%; however, many US markets, including Wall Street and the Treasury market, are closed on Thursday due to a national holiday.
Indian markets likely to continue losses in a cautious climate
Indian stock benchmarks, including the Sensex and Nifty 50, are expected to open lower on Thursday, continuing their downward trend.
This cautious sentiment is fueled by the ongoing conflict between Israel and Iran, as well as reactions to the US Federal Reserve’s recent policy update.
Trends on the Gift Nifty indicated a weak opening for Indian indices, showing a trading level around 24,740—an almost 87-point drop from the previous Nifty futures settlement.
This follows a decline on Wednesday, where the domestic equity market fell for the second consecutive day.
The Sensex fell by 138.64 points, or 0.17%, closing at 81,444.66, while the Nifty 50 decreased by 41.35 points, or 0.17%, ending at 24,812.05.
Fed maintains rates, Powell warns of tariff-induced inflation
In the US, the Federal Reserve sent out mixed signals to the markets overnight. As anticipated, officials opted to keep benchmark interest rates stable at levels between 4.25% to 4.5%.
Federal Open Market Committee (FOMC) members also sustained their projection for a total of 50 basis points (bps) in interest rate cuts for 2025.
However, during a press conference, Fed Chair Jerome Powell expressed caution regarding further easing.
Powell predicted “meaningful” inflation on the horizon, linking this outlook to the potential effects of President Trump’s aggressive tariffs on trade.
This warning about looming inflation adds complexity for investors who are already navigating geopolitical uncertainties.
Safe havens rally, oil prices remain high
In light of rising uncertainties, traditional safe-haven assets are seeing increased interest. Gold prices went up by 0.3%, reaching $3,378 per ounce.
The Japanese yen, another popular safe asset, rose by 0.2% to trade at 144.92 per dollar.
The US dollar also gained some safe-haven traction, increasing by 0.1% against the euro to $1.1472 and rising by 0.2% against the British pound to $1.3398.
Conversely, the Swiss franc experienced a slight decrease of 0.1%, dropping to 0.8193 per dollar.
Brent crude oil prices eased slightly to $76.32 per barrel but remain close to the recent high of $78.50, reflecting ongoing fears about possible disruptions to global energy supplies.
Later today, policy announcements from the Bank of England and the Swiss National Bank are anticipated. The Bank of England is widely expected to maintain steady interest rates, while the Swiss National Bank is likely to cut rates by 25 basis points.
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