Stocks rally on Middle East truce relief, RBI rate pause

Indian benchmark stock indices jumped nearly 4% on Wednesday, 8 April, after the Reserve Bank of India (RBI) held interest rates steady and a two-week ceasefire in the Middle East sent oil sharply lower, setting off a relief rally across equities, bonds and the rupee.

The Sensex rose 3.95% to 77,562.90, its best day in five years, while the Nifty 50 climbed 3.78% to 23,997.35, its strongest session in 11 months. The rupee gained 0.5% to close at 92.58 per dollar, and the benchmark 10-year bond yield fell about 15 basis points to 6.8984%, its steepest one-day drop since May 2022.

The India VIX, or the fear index, fell about 21% to close at 19.53 on Wednesday after the US and Iran announced a ceasefire, pulling oil prices lower and reviving risk appetite, though analysts still urged caution over how durable the truce may prove.

The RBI’s rate decision did little to upset the mood because it landed broadly where markets expected.

RBI governor Sanjay Malhotra kept the repo rate unchanged at 5.25% and retained a neutral stance, while warning that the Iran conflict had clouded the outlook for both growth and inflation.

The central bank cut its FY27 growth forecast to 6.9% from 7.6% and projected inflation at 4.6%, with core inflation seen at 4.4%. It also signaled it would stay proactive on liquidity to keep overnight rates aligned with policy settings.

What really powered the move was oil. President Donald Trump agreed to a two-week ceasefire with Iran just before a U.S. deadline tied to reopening the Strait of Hormuz, and an Iranian official said the waterway could reopen in a controlled way ahead of talks in Pakistan.

Brent crude sank 13.7% to about $94.29 a barrel and US crude fell 16% to around $94.93, reversing part of a war-driven spike that had pushed prices above $100 and threatened India’s inflation and current-account outlook.

That relief spread quickly through Indian stocks, where all 16 major sectors advanced.

Financials led with a 5.5% gain, while auto and realty stocks each rose 6.8%, reflecting how quickly investors rewired positions around the prospect of lower fuel costs, softer inflation pressure and a less hostile rates backdrop.

Small- and mid-cap indexes both gained more than 4%, underscoring how broad the rebound was.

Reuters reported that stocks and bonds across the region surged as oil fell below $100 and traders began unwinding some of the worst-case assumptions around a prolonged energy shock.

Japan’s Nikkei and other regional benchmarks posted outsized gains, while Wall Street futures pointed sharply higher as risk appetite returned.

The rally had the familiar feel of a ceasefire trade, with oil importers and travel-related names among the biggest beneficiaries.

European markets followed followed with even bigger swings. The STOXX 600 rose 3.6% to 611.86, on track for its best day in a year, while Germany’s DAX jumped 4.7% and London’s FTSE 100 added 2.5%.

Travel, industrial and banking shares gained 6% to 7%, and technology stocks climbed 6.2%, helped by the plunge in energy prices and a drop in volatility.

Oil companies, unsurprisingly, lagged, with the energy sector down about 4% as investors marked down crude.

The move across commodities was less straightforward than the equity rally suggested.

Oil collapsed on hopes that flows through Hormuz would resume, but gold rose 1.7% to around $4,783 an ounce, helped by a weaker dollar and renewed bets that lower energy prices could ease inflation pressure and eventually reopen the door to rate cuts. Other precious metals rose even more sharply, with silver up 5.6%, platinum up 5.1% and palladium up 4.5%.

Reuters noted that the ceasefire remained fragile, with energy infrastructure damaged and the longer-term supply picture still tighter than before the war.

Meanwhile, following the ceasefire, Israel made clear the truce does not extend to Lebanon, with Prime Minister Benjamin Netanyahu’s office backing the two-week pause on Iran strikes while saying operations against Hezbollah would continue.

Reuters reported that Hezbollah had paused attacks, but Israeli forces kept up operations in Lebanon, including strikes around Sidon and Tyre, underscoring how limited the ceasefire remains beyond the US-Iran theater.

Iran has signaled that any reopening of Hormuz may be gradual and controlled, with ships potentially required to coordinate with its military before passage resumes. A fresh complication is Tehran’s proposal to charge ships for transiting Hormuz as part of a wider peace arrangement. Reuters reported that Iran is discussing a protocol with Oman, though Muscat has not confirmed any agreement and the proposal has drawn opposition from the US, Gulf states and shipping officials.

For India, an immediate consequence of the ceasefire is easing supply. Reuters reported that India is poised to receive its first Iranian oil cargo in seven years after temporary US sanctions relief, a shift that could help refiners as they rebuild inventories after weeks of disruption.