Indian markets set for flat open as geopolitical tensions weigh on Asian sentiment

The Indian stock market is bracing for a muted Thursday morning. Gift Nifty futures were hovering near 24,423.50 in early trading, down roughly 50 points from where Nifty futures closed the previous day—a signal that the Sensex and Nifty 50 will likely open flat, without much conviction in either direction. This subdued tone reflects a broader unease settling over Asian markets as investors weigh competing forces: relief from softer-than-expected US inflation data on one hand, and deepening geopolitical tensions on the other.

Wednesday's session in India captured this tension perfectly. Both the Sensex and Nifty 50 spent much of the day under pressure, each dipping close to 1% at their worst moments before staging a recovery in the final hour. The Sensex ultimately closed down 188 points, or 0.24%, at 77,966.35, while the Nifty 50 fell 36 points, or 0.15%, to settle at 24,435.95. The volatility was real—the market briefly breached the 24,350 support level before buyers stepped in—but the losses were contained. Analysts attributed the caution to renewed Middle East tensions and uncertainty ahead of key inflation readings from both India and the United States.

Across Asia, the picture was mixed but generally stronger. South Korea's Kospi emerged as the region's standout performer, surging 4.48%, while Japan's Nikkei 225 gained 1.83% and the broader Topix index advanced 1.01%. These gains were anchored by July's US inflation data, which came in softer than feared—consumer prices rose just 0.1% month-on-month and 3.4% year-on-year—easing immediate concerns that the Federal Reserve might raise interest rates. Hong Kong's Hang Seng futures, however, fell 0.87%, signaling some hesitation in that market. Australia's S&P/ASX 200 was the only major index to close lower, slipping 0.12%.

Wall Street's response was equally restrained. The Dow Jones Industrial Average traded within a narrow 240-point range and ended almost flat, while the S&P 500 and Nasdaq managed modest gains of 0.3% and 0.5% respectively. The softer inflation reading failed to ignite enthusiasm; instead, investors seemed content to hold their positions and wait for clearer signals.

The real weight on sentiment, however, comes from energy markets and geopolitical risk. Brent crude futures fell $1.29, or 1.5%, to $87.69 a barrel, while US West Texas Intermediate crude declined $1.30, or 1.6%, to $81.97 a barrel. The decline reflects analyst forecasts cutting global oil demand for 2026 due to disruptions from the US-Israeli conflict with Iran. Yet the downside remains capped by genuine supply concerns: US commercial crude inventories surged last week by their largest amount since January 2023, driven partly by a sharp drop in exports. More significantly, the Middle East conflict, combined with ongoing attacks on shipping and energy infrastructure, continues to tighten global crude and refined-product markets.

Diplomatically, the situation shows little sign of resolution. US President Donald Trump has asserted that Washington maintains "total control" over the strategic waterway at the center of the dispute, while US-Iran talks appear deadlocked, with both sides holding firm to hardline positions. Pakistan, which has been mediating, reported that the broader peace process has stalled, though the deadline for a US-Iran memorandum of understanding could potentially be extended. This geopolitical impasse, layered atop the Russia-Ukraine conflict, creates an underlying anxiety that no single piece of good economic data can fully dispel.

On the domestic front, Indian investors will have plenty to digest. More than 570 companies are scheduled to report their first-quarter earnings on Thursday, including Tata Motors Passenger Vehicles, LG Electronics India, Honasa Consumer, Max Financial Services, and General Insurance Corporation of India. These results could provide fresh direction for the market if sentiment stabilizes. Gold prices, meanwhile, have remained relatively stable around $4,400 an ounce, having climbed 0.9% on Wednesday following the softer inflation data. Spot gold was down just 0.1% at $4,403.02 an ounce in early trading.

The day ahead will likely be defined by this same tension: the pull of better-than-feared inflation data against the weight of unresolved geopolitical risk and energy market uncertainty. For Indian markets, it means a cautious opening and a day spent watching both the earnings calendar and the news wires for any shift in the balance.