Petrol and diesel prices remained steady on Tuesday, unaffected by the global energy crisis, as the Center stepped in to cushion domestic consumers from price pressures. Disruption to the energy supply chain has caused fuel prices to skyrocket around the world. The blockade of the critical trade route – the Strait of Hormuz, through which roughly a fifth of the world’s oil and gas exports go, resulted in fuel shortages.
Since the outbreak of war in West Asia, this strategic waterway has been a major obstacle in Iran’s peace talks with the United States. As the US and Iran traded blows across the narrow waterway in the Persian Gulf, oil prices remained elevated despite a slight drop on Tuesday. Brent crude is trading around $113 a barrel after Monday’s gains, indicating a 1.10% drop from the previous day.
Oil-importing economies such as India are feeling the pressure as the rupee weakened 20 paise to 95.43 against the US dollar in early trade on May 5. The rupee broke its April 30 low of 95.3337 after fresh clashes between the US and Iran.
“With oil sizzling, the rupee fell to a closing low of 95.0875 on Monday and opened even lower this morning as it becomes increasingly vulnerable as the dollar index rises on safe-haven buying and oil prices rise on continued struggles in the Gulf region,” Finrex Treasury Advisors LLP head of finance and managing director Anil Kumar quoted Bhanali as saying to PTI.
He added that higher oil prices will keep the rupee sold against the dollar as oil companies and FPIs step up purchases of the dollar.
Market sentiment remains fragile due to renewed military stock exchanges. According to forex traders, volatility in the Persian Gulf has contributed to investor fears, causing a massive flight of capital into safe-haven assets, with the US dollar benefiting the most.
As the two nations battled for control of maritime traffic through the Strait of Hormuz, the Sensex fell 361.62 points to 76,907.78 in early trade, while the Nifty fell 134.90 points to 23,980.60.
Is IPEF losing importance under Trump’s aggressive trade strategy?
The Indo-Pacific Economic Prosperity Framework (IPEF), a 14-member grouping comprising India, the US and Australia, is losing relevance under US President Donald Trump’s aggressive trade strategy, the Global Trade Research Initiative (GTRI) think tank said on Tuesday. Launched jointly by the US and other Indo-Pacific partner countries on 23 May 2023 in Tokyo, the IPEF appears to have “little practical role” in the near future.
She made the remarks in reference to US President Donald Trump’s approach of high tariffs, aggressive use of Section 301 investigations and swift bilateral agreements, which stand in stark contrast to IPEF’s cooperative non-binding structure.
