Oil continues to play spoilsport
There seems to be no respite for the market when it comes to bad news on oil front.
A sustained surge in global crude oil prices has fuelled inflation worldwide and dampened growth prospects for the global economy, driving investors to exit equities.
Oil prices have risen by more than 40 per cent so far this year. The spike hurts India more than many other countries as this South Asian nation imports about 75 per cent of the crude needed to keep its economy going.
On Tuesday, crude jumped again, rising more than $2 after the International Energy Agency, or IEA, revived concerns about long-term supply shortages and tension between Israel and Iran raised fears about possible outages in the much nearer term.
London Brent crude rose $2.41 to $142.24 a barrel, while US crude rose $2.06 to $142.06 a barrel in intra-day trading.
The IEA's medium-term outlook said world oil demand would rise less than previously forecast, but it also said supply would be tighter than anticipated.
The agency said supplies will stay tight until 2013 and arguments that speculators were driving up crude prices may be weak on evidence.
Those remarks pushed crude prices again.
New reports about tension escalating between Israel and Iran, OPEC’s second biggest oil producer, also contributed to the rally.
Speculation has mounted that Israel plans to attack Iran's nuclear facilities, which Iran says are for purely peaceful purposes, following a big Israeli air force exercise last month.
Iran's Revolutionary Guards said Iran would impose controls on shipping in the Strait of Hormuz if the country were attacked, a newspaper reported at the weekend. Roughly 40 per cent of the world's traded oil moves through the narrow waterway separating Iran from the Arabian Peninsula.
"The market has been worried about the tensions involving Iran and that remains a supportive factor for the oil price," a Reuters report quoted David Moore, a commodities analyst at the Commonwealth Bank of Australia in Sydney, as saying.