Sensex plunged to 1800 points and Nifty is at 16, 500 as an impact of the Ukraine-Russia crisis. The equity market has crashed to 3 percent and the Moscow exchange has suspended trading across all markets. On the other hand, Brent, the global benchmark crude has crossed 100 dollars a barrel. This rise in price happened after Russian President Vladimir Putin announced military operations in Ukraine. India is feeling the heat of a souring relationship between Ukraine and Russia.
What are the exact reasons behind the surge in oil prices?
The fear of supply-side disruptions as Russia is the second-largest producer of oil in the world is the major reason behind the price surge. Russia has invaded the separatist areas, Donets and Luhansk the separatist area of Russia, and has deployed troops indicating a full-fledged war in the upcoming days.
The Russian invasion of Ukraine could not only disrupt crude supplies globally but also lead to sanctions by the US and Europe. The US is still to come out with financial sanctions and penalties it is going to impose on Russia for invading Ukraine. Meanwhile, Germany announced on Tuesday that it will suspend its certification of the newly built but never operated ambitious Russia-Germany Nord Stream 2 pipeline. The multibillion-dollar project of Russia’s Gazprom energy company and European companies will have pipelines carrying Russia’s natural gas to the markets of Europe.
The prediction is similar and more sanctions by the US forcing Russia to surrender its demand fearing recession is also a significant reason behind the oil prices rising over the last couple of months.
The global economy is still reeling from the pandemic and the normalization process will be hugely impacted because of the gap between supply and demand.
The connection these global events have on the Indian economy is fundamentally boosting the inflationary graph. India relies heavily on imports for oil requirements. More than 80 percent of its oil is imported and the share of oil imports from total imports is 25 percent. It is predicted that the rise in crude oil prices will increase the subsidy on LPG and kerosene, pushing up the subsidy bill. India which already dealing with a price hike might witness a worsened situation.
Affect on the market
The equity market indices marked a sharp plunge today as the investors are cautious after Russia announced a military operation in Ukraine. According to India Today, as of 1:29 pm, the benchmark BSE Sensex tanked 2,005 points or 3.50 percent to 55,270; while the broader NSE Nifty moved 614 points or 3.52 percent down to 16,448.
Asian share markets also slumped as Japan’s Nikkei fell 2.17 percent, South Korea’s KOSPI was down 2.66 percent and the Shanghai Composite index dropped 0.89 percent.
All the 15 sector gauges accumulated by the National Stock Exchange were trading in red. Nifty PSU Bank and Nifty Auto were underperforming the index by falling as much as 3.20 percent and 2.71 percent, respectively.
The situation is to prevail in the upcoming days as the increasing tension between Russia and Ukraine.
Also Checkout: Why has Russia invaded Ukraine and what does Putin want?
