This week, global markets were shaken by chaos as the heightening conflict in West Asia resulted in one of the biggest oil price increases in years. 

As tensions rose between Iran and Israel, among other countries, crude oil prices climbed above $114 per barrel, the first time since 2022 that they reached this price level. 

Ye kaisa comeback hai, god ji? 

As a result of this shock, global markets experienced a severe stock market crash, and many countries experienced currency devaluation, while at the same time experiencing renewed fear of a new wave of inflation.

Multiple global media such as The Hindu, Reuters, Yahoo Finance, and The Federal released information about the developments, which many economists believe are likely to have a significant impact on the global economy, depending on how long the conflict continues.

And yes, this is one of those geopolitical events that happens thousands of kilometres away from where you are and suddenly starts affecting your fuel bill, investments, and possibly the currency of your country.

Mere ko toh aisa dhak dhak horela hai baba. 

Here is a brief history of the recent developments and what has occurred as a result.

Oil Prices Soar With War Conflict Putting Global Supply Chain at Risk?? 

The most immediate shockwave came from the oil market. Brent Crude Oil, or the world standard of oil prices, recently topped $114 per barrel, representing the highest price level since the onset of the Russia-Ukraine war in early 2022.

According to information sourced from The Federal in October; After resuming trading in the Chicago Mercantile Exchange, the price of Brent Crude Oil increased by more than 23%, compared with the previous day’s closing price of $92.69.

The same occurrence happened with US crude oil. West Texas Intermediate (WTI) also increased to approximately $114 a barrel, about 25% higher than Friday’s closing price of $90.90.

This increase didn’t occur without any warning tho; the previous week, oil prices increased sharply by more than 36% for US crude oil and by approximately 28% for Brent crude oil, according to Yahoo Finance data.

SIGH! 

The markets responded immediately due to investor fears surrounding potential disruptions/acts occurring in the Middle East (a major producer of oil for the rest of the world).

Yes, unko bhi dhak dhak horela tha baba. 

Reasons for the panic about oil prices can be attributed to the Strait of Hormuz, the world’s critical oil chokepoint.

According to reports referenced by The Federal, approximately 15 million barrels of crude oil travel through this narrow channel every day, accounting for approximately 20% of total crude oil available on the world market.

Major crude oil producing countries that reside along (or utilize) this waterway are:

• Saudi Arabia

• Kuwait

• Iraq

• Qatar

• Bahrain

• UAE

• Iran

Any disruption to this passage will immediately freeze and shock all global energy market prices! 

*Shudder shudder* 

Several reports indicate that Iran’s threats of missile and drone attacks have caused a slow down in tanker traffic and created fears that oil shipments will be cut-off or decreased drastically.

As supply risks increase, so do the associated prices; and all global energy markets simply detest uncertainty! 

What’s up with the universe yaaawr? 

Several Israeli airstrikes have attained oil depots in Tehran and Bahrain has accused Iran of attacking a desalination plant that’s crucial to their drinking water supply per the published reports cited in The Federal.

Energy traders were/are very concerned by these recent attacks on oil facilities because they can immediately take away from the oil supply.

Also, Iraq, Kuwait, and the UAE (and others) have already reduced oil production rates based on storage tanks being filled-up due to not being able to send their crude oil out of the country because of the ongoing conflict.

When the world sees attacks on oil production facilities, energy markets react instantaneously and often viciously.

Their responses are quicker than all of our situationships combined, and it’s scary! 

Once oil prices skyrocketed, the global financial market dramatically moved southwards.

Wall Street major indexes fell over 1%, according to a report released by Reuters, because of investor fears regarding higher oil prices potentially driving inflation to record levels again.

Many industries suffered from severe losses

Airline stocks plummeted due to the high cost of fuel, which is a significant portion of an airline’s operational budget. As a result, an index that monitors airline shares within the S&P 500 lost over four percent of its value in one day.

Cruise line organizations also took a dive.

• 85% of Carnival Corp lost seven and three tenths percent.

• Royal Caribbean lost six and three tenths percent.

Large financial institutions experienced loss of value.

• Morgan Stanley had a two and three tenths percent decline in stock value.

• Citigroup reported approximately three percent lower stock prices.

Companies in the energy sector gained overall as the increase in the price of oil typically helps them generate higher profit margins.

Chalo, kisi ka toh bhala ho raha hai duniya me. 

The Indian stock market experienced similar losses to those seen globally.

According to sources, including the Press Trust of India (PTI) and The Hindu, the benchmark Sensex fell 1,352.74 points to close at 77,566.16 points.

Similarly, the Nifty Index fell 422.40 points to end at 24,028.05 points.

Both indexes had even bigger decreases during intraday trading.

• The Sensex dropped 2,494 points during intra-daily trading.

• The Nifty fell by more than 752 points during intra-daily trading.

Several of the largest publicly traded companies on the stock market had significant losses.

UltraTech Cement was the largest loser, losing 5.23 percent of its total stock value.

Other examples of companies that suffered significantly from declining stock prices include:

• Maruti (a leading automotive manufacturer)

• Mahindra & Mahindra (another leading automotive manufacturer)

• State Bank of India (India’s largest bank)

• InterGlobe Aviation (one of India’s largest airlines)

• Adani Ports (the largest port operator in India)

On the other hand, there were a few notable gainers among the set of companies whose stock prices increased slightly a day before the market closed. The following companies reported gains over the previous closing price of each company.

The winners include:

• Reliance Industries

• Sun Pharma

• Infosys

• Tech Mahindra

• HCL Technologies

The Indian Rupee Falls to All-Time Low

Following the turmoil in international markets, Indian currency, the rupee, has also suffered its share of depreciation.

Rupee be like, “Mujhe nahi pata tha mai kisi din itna gir jaunga.” 

According to an article in PTI, the rupee closed 53 paise lower on Tuesday at an all-time low of ₹92.35 against THE US dollar.

The depreciation of the rupee was more pronounced because of major foreign fund outflows from Indian equity markets, which further compounded the pressure on the rupee.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, explained that ““The rupee opened sharply lower, hitting a fresh record low of 92.35 on weak global markets and an overnight surge in crude oil prices. Strong dollar and FII outflows also pressured the rupee.”