MUMBAI: Renewed optimism over a potential peace deal in West Asia on Thursday night drove the Dow Jones up over 900 points and pulled Brent crude prices below the $90-per-barrel mark, with the ripple effect felt on Dalal Street on Friday. The Sensex, after surging more than 1,000 points in early trade and dipping slightly mid-session, closed 1,695 points higher at 75,528 points. The decline in crude oil prices also strengthened the rupee against the dollar.
Peace Deal Hopes Revive Markets
On Thursday, after issuing threats of an imminent US strike on Iran, President Donald Trump reversed his stance, indicating that a deal with the country was nearing. This statement prompted crude prices to slide sharply, with Brent crude falling to $85.8 a barrel at one point, a three-month low.
Part of the rise in the domestic market, especially during the last hour of trading, was attributed to short covering by traders who had earlier bet on a market decline, dealers said. The day's rise in the Sensex was the third-best single-session points gain for the index in 2026. Friday's market rally made investors richer by Rs 9.7 lakh crore, with BSE's market capitalisation now at Rs 462 lakh crore, exchange data showed.
Analyst Insights
According to Siddhartha Khemka of Motilal Oswal Financial Services, reports indicating that negotiations between the US and Iran were nearing completion reduced fears of prolonged disruptions to global crude oil supplies, pushing oil prices below the $90 per barrel mark. "The sharp market recovery suggests that investors are beginning to price in a more favourable geopolitical outcome. While a formal agreement remains pending, the moderation in crude oil prices and the appreciation of the rupee against the dollar have improved the near-term outlook for domestic equities."
Going forward, global cues will remain important, with the US Federal Reserve's policy meeting and US industrial production data likely to provide direction to financial markets, Khemka said. "Additionally, developments in the US-Iran negotiations, crude oil price movements and foreign fund flows will remain key factors influencing market sentiment."
Fund Flows and Rupee Strength
The day's gains were backed by strong buying by domestic funds, while foreign funds continued to be net sellers. At the close of the session, domestic institutional investors reported a net inflow of Rs 5,341 crore, while foreign portfolio investors (FPIs) were net sellers at Rs 1,082 crore, BSE data showed.
The rising possibility of a US-Iran peace agreement that pulled crude oil prices down strengthened the rupee on Friday. The Indian currency opened more than 40 paise firmer from Thursday's close at 95.76/$, briefly traded above 95, and finally settled at 95.11, up 65 paise for the day.
