“There are decades where nothing happens, and there are weeks where decades happen.”
The line, often attributed to Russian revolutionary Vladimir Lenin, captures how history sometimes moves unevenly – long periods of calm followed by sudden bursts of change.
For much of the past year, investors had grown comfortable with some assumptions: geopolitical tensions might produce headlines, but rarely lasting financial consequences; oil would spike briefly; equities would wobble; and markets would soon return to watching inflation data and central-bank signals.
Markets can carry such assumptions for surprisingly long periods. Until suddenly they cannot. That assumption is now being tested.
Escalating tensions in the Middle East after the United States and Israel attacked Iran have pushed oil prices more than 15% higher within a week and reintroduced a familiar risk for global markets: disruption to energy supply routes.
The immediate transmission runs through oil and gas. India imports more than 85% of the crude it consumes and spent almost $100 billion in the first ten months of this fiscal year. The country also imports nearly half of its natural gas and spent over $11 billion during the same period, according to petroleum ministry’s data. This means global energy prices directly impact domestic inflation, currency stability, corporate earnings, and India’s current account.
That impact was visible across Indian markets this week. The rupee weakened to record lows beyond 92 per US dollar as global risk aversion pushed investors toward the greenback. Bond yields turned volatile as inflation expectations rose. Equity markets lost ground as investors reassessed the implications of high oil prices and geopolitical uncertainty.
Indian companies have also started feeling the impact. Refiners resumed buying Russian oil, after reducing purchases under US pressure last year. State-run MRPL suspended fuel exports and shut a refining unit. Petronet’s LNG imports from Qatar fell, forcing state-run GAIL and Indian Oil to reduce supplies. Meanwhile, Adani Total Gas raised prices. For now, the impact is limited to industries such as fertilizer. If the war stretches, it will start hurting household budgets.
Energy, however, is not the only channel through which Middle East tensions reach the Indian economy. The region is closely connected to India through remittances, trade and labour flows. Almost nine million Indians work in the Gulf, and they sent home over $51 billion last year. That accounts for nearly 38% of the total remittances to India, per a Citi report.
This is not all. Flight disruptions are affecting the aviation, travel, and hospitality sectors. Trade in gems and jewellery has been affected, too. Clearly, disruption in shipping routes, labour mobility or trade carries wider economic implications.
That broader exposure is beginning to feature in investor calculations. Currency hedging costs for Indian importers have risen as oil prices climb and volatility in the rupee increases. Markets are effectively pricing the possibility that the conflict could extend beyond a short-lived geopolitical episode.
Financial markets rarely react to geopolitics itself. They react to its economic impact. In this case, the key question is not simply whether tensions persist – but whether they begin to disrupt energy supply or trade routes in a sustained way.
If disruptions deepen, the effects could spread across currencies, inflation expectations, and corporate earnings. For now, markets are trying to assess which scenario is more likely.
What has clearly shifted is the underlying assumption. For much of the past year, investors treated geopolitical flare-ups as background noise. The latest escalation has reminded markets that energy supply remains one of the most sensitive channels through which global conflict reaches financial systems. Markets are beginning to price this reassessment.
Fuel and Realignment
The oil shock this week is a reminder of a deeper structural reality: for energy-hungry economies like India, geopolitics and energy security are rarely separate questions.
That reality sits quietly behind one of the more significant outcomes of Canadian Prime Minister Mark Carney’s visit to India this week – a long-term nuclear fuel agreement that signals both an energy partnership and a diplomatic reset.
India and Canada announced several areas of cooperation after talks between Prime Minister Narendra Modi and Carney in New Delhi, spanning nuclear energy, critical minerals, technology and defence. Both sides also reiterated their intention to conclude a long-pending free trade agreement, potentially by the end of next year.
The most concrete outcome, however, lies in nuclear fuel. Under a deal with Canadian uranium producer Cameco, India will import 22 million pounds of uranium between 2027 and 2035, for an estimated around C$2.6 billion ($1.9 billion).
The agreement addresses a structural constraint in India’s nuclear ambitions. Although India has uranium reserves, much of the ore is relatively low grade, making domestic production costly. Imports, therefore, meet the majority of the country’s uranium needs – a reliance likely to persist as nuclear capacity expands.
That expansion is substantial. India aims to increase nuclear power generation from roughly 9 gigawatts today to about 100 gigawatts by 2047 as part of its long-term strategy to meet rising electricity demand while reducing dependence on fossil fuels. Fuel supply, in that context, is not a minor logistical issue. It is a structural prerequisite.
Seen this way, the Cameco agreement forms part of a broader effort by India to diversify its nuclear fuel sources. India has also recently strengthened supply arrangements with Kazakhstan’s state-owned uranium producer Kazatomprom, while Russia continues to provide fuel linked to reactors at Kudankulam.
For investors, the significance of this week’s developments is less about the immediate contract value and more about the direction of policy. As energy demand rises and geopolitical risks become more visible, long-term supply relationships – whether for oil, gas or nuclear fuel – are becoming a central component of economic strategy.
Guarding Information
If energy diplomacy is about securing physical supply, financial markets depend on a different kind of security: the integrity of information. That area is increasingly drawing the attention of India’s capital markets regulator.
The Securities and Exchange Board of India has begun pressing banks, regulators and other institutions to tighten safeguards around insider trading – particularly the handling of unpublished price-sensitive information that can move markets when disclosed.
SEBI chair Tuhin Kanta Pandey said this week the regulator was expanding its focus beyond corporate insiders to include people who access market-moving information in a fiduciary capacity – including bankers, consultants and even officials within regulatory bodies.
The remarks reflect a widening enforcement lens. In the past year, SEBI has taken action against officials linked to India’s electricity regulator and executives at IndusInd Bank, while issuing notices over alleged violations to Bank of America and consulting firms PwC and EY.
The numbers suggest a broader regulatory push. SEBI investigated 287 cases of suspected insider trading in the financial year 2024-25, up from 175 cases the year before, according to regulatory data.
The shift reflects a deeper challenge within modern financial systems. Market integrity increasingly depends not only on corporate disclosures but on how information travels across a complex ecosystem of advisers, lenders, regulators and intermediaries. As financial networks become more interconnected, the boundary of who counts as an “insider” becomes less obvious.
For investors, enforcement in this area matters for the trust it sustains. Insider trading rarely moves markets on its own. But confidence that price-sensitive information is broadly protected underpins how capital markets function.
When that confidence weakens, investors begin to demand a higher premium for risk, raising the cost of capital across the system. SEBI’s expanding scrutiny suggests the regulator is trying to address that risk earlier in the chain, before sensitive information turns into market advantage.
Competition for Savings
If regulators are focused on how information moves through markets, another policy decision this week highlights how savings move through the financial system.
The Employees’ Provident Fund Organisation has recommended retaining the interest rate on provident fund deposits at 8.25% for this financial year. The rate, which must still be approved by the finance ministry, applies to a corpus of more than Rs 28 trillion, making it one of the largest pools of household savings in the country.
On the surface, the decision signals continuity. The rate remains unchanged from the previous year despite global financial uncertainty, with the government emphasising that returns remain “stable and competitive”. But the choice reflects a broader balancing act in India’s financial system.
Provident fund deposits sit within India’s wider small-savings ecosystem – alongside instruments such as the Public Provident Fund and National Savings Certificates – that compete directly with bank deposits for household savings. When these government-backed schemes offer relatively attractive returns, they draw from the same pool of funds banks rely on to support lending.
That dynamic has become more visible recently. Credit growth in India has outpaced deposit growth, prompting banks to compete more aggressively for retail deposits and, in many cases, offer higher rates to retain savers.
For the government, however, the calculus looks different. Provident fund and small-savings balances are largely invested in government securities, effectively allowing the state to borrow from households through administered savings schemes. That creates a delicate policy balance.
Returns must remain attractive enough to retain savers, particularly at a time when households face higher living costs. But if they rise too far above market deposit rates, funds can shift away from banks, tightening liquidity in the broader financial system.
Seen this way, holding EPFO returns steady is more about maintaining equilibrium – between protecting household savings, supporting government borrowing and preserving the flow of deposits into the banking system.
Market wrap
Indian stock markets closed lower this week, dragged down by worries over the war in the Middle East that sent crude oil prices soaring and soured investor sentiment.
The Nifty 50 and the BSE Sensex slipped about 2.9% each. This is their steepest weekly decline in more than a year.
The mid-caps also declined 2.9% while the small-caps slid 2.5%. Fifteen of the 16 major sectoral indexes fell this week–the IT index was the only one in the green after sliding sharply in previous weeks.
The PSU bank index lost nearly 7% on concerns that higher crude prices could push bond yields up and lift government borrowing costs. The oil and gas index dropped nearly 4%, as state-run Indian Oil, BPCL, and HPCL fell.
Among Nifty 50 stocks, IndiGo parent Interglobe Aviation was the worst performer as it plunged 8.8% this week on worries that international flight curbs and higher fuel costs could dent its earnings.
Engineering giant Larsen & Toubro, which has a high exposure to the Gulf region, slipped 7.7% while Tata Motors Passenger Vehicles skid by more than 8%.
Eight more stocks lost more than 5% each. These included Shriram Finance, HDFC Life, Tata Steel, Eternal, Adani Enterprises, Jio Financial and Bajaj Finserv.
Only eight Nifty 50 stocks managed to end in the green. These included heavyweight Reliance Industries, drugmakers Sun Pharma and Dr Reddy’s Labs, and defence-focused PSU Bharat Electronics.
Other Headlines
- India retail auto sales surge 25.6% in February on GST-cut boost, seasonal demand
- Services PMI growth slows to 58.1 in February from 58.4 in January on cost pressures
- Manufacturing PMI growth hits four-month high in February at 56.9 from 55.4 in January
- Industrial output growth slows to three-month low of 4.8% in January, shows govt data
- Current account deficit widens to $13.2 billion in Oct-Dec quarter on large trade gap
- GST collections rise 7.9% year on year to Rs 1.61 trillion in February, shows govt data
- Walmart-backed PhonePe targets up to $10.5 billion valuation in IPO, reports Reuters
- Air India Express MD Aloke Singh to step down in March after five years in the role
- Mahindra & Mahindra to exit Japan agricultural machinery business as losses mount
- Clean Max Enviro Energy Solutions falls 18% in trading debut after weak IPO demand
That’s all for this week. Until next week, happy investing!
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