Sensex and Nifty surged on Friday, ending the week on a strong note after reports of a possible US-Iran peace agreement raised hopes of easing disruptions to global oil supplies and triggered a sharp decline in crude oil prices.
The BSE Sensex jumped 1,695.40 points, or 2.3%, to close at 75,527.95, while the Nifty 50 advanced 461.30 points, or 1.99%, to settle at 23,622.90.
Markets opened sharply higher, with the Sensex gaining more than 900 points and the Nifty rising over 250 points in early trade, before extending gains through the session. Track live updates on the war
Progress in US-Iran talks
Investor sentiment improved after US President Donald Trump said there had been a progress in talks aimed at ending the war on Iran.
A draft agreement contains 14 provisions, including the reopening of the Strait of Hormuz within 30 days, the release of $24 billion in frozen Iranian assets and 60 days of negotiations on nuclear issues, according to Iran’s semi-official Mehr news agency. A G7 official said a deal could be signed as early as Sunday.
The developments raised hopes of an end to the more than 100-day war, which began when US and Israel attacked Iran unprovoked on February 28. It has since disrupted global energy supplies.
Oil prices tumble
Crude oil prices fell sharply on Friday amid expectations that an agreement could lead to the reopening of the Strait of Hormuz, a critical route for global oil and gas shipments.
Brent crude, the international benchmark, declined 4.5% to $86.31 a barrel, while US crude dropped 4.3% to $83.90 a barrel. Spot gold edged up 0.2% to $4,221.46 an ounce, according to Bloomberg.
Why did the market rise?
The rally was driven largely by the sharp decline in oil prices.
The conflict in Iran led to the closure of the Strait of Hormuz in March, pushing crude prices higher and adding to inflationary pressures globally. Any signs that the waterway could reopen are viewed positively by markets because they reduce concerns over supply shortages.
Lower oil prices are particularly beneficial for India, which imports most of its crude oil requirements. A decline in crude prices can help reduce the country’s import bill, ease inflationary pressures and lower costs for businesses, providing a boost to investor sentiment.