Peace in West Asia, relief for the world

War draws to a close as US, Iran agree to sign deal on Friday

- Rituraj Baruah

After multiple false starts towards peace, the US and Iran agreed to shake hands and end the West Asia war that has rocked the world for over 100 days, sending waves of relief across markets, industries and policy circles. Yet, concerns remain about the deal's stability and longevity, given Israeli officials' opposition to a deal they say does not address their country's concerns.

Crude oil prices were the first to react to the news, falling around 5%, after news broke that the two sides will sign the peace agreement on Friday in Switzerland. On Monday evening, the Brent August contract was trading 4.95% lower at $83.01 per barrel. Global markets cheered, with stocks in Japan and South Korea jumping over 5%, while the Shanghai Composite gained nearly 2%. Indian equities joined in, with the Nifty climbing 1%.

The rupee strengthened, closing below the 95-mark. Benchmark 10-year government bond yield fell four basis points to 6.87%, tracking declines in US Treasury yields and lower oil prices.

"This is a massive short-term relief," said Dhiraj Relli, managing director and chief executive officer at HDFC Securities. Nilesh Shah, managing director of Kotak Mahindra AMC, said the deal de-risks a key vulnerability for India's economy.

Out of India's annual oil imports of around $123 billion, 60-70% used to cross the Strait before the war. Cheaper oil augurs well for India, which imports about 90% of its oil requirement.

Though a peace deal is positive for India, much will depend on the details, said Pronab Sen, India's former chief statistician.

"If the opening comes with conditions or operational constraints, concerns over energy supplies and freight costs may persist. However, if normal shipping operations are fully restored, it could significantly ease pressure on the Indian economy through lower crude oil prices, reduced inflationary risks and a smaller import bill," Sen said.