May, 2026

End of War in sight?

Mohit Dugar, CFA || ARN - 314375

Everyone has just one question on their minds – when will the war be over? Honestly, we don’t know, only one person has the power to answer that question, but he isn’t able to make up his mind.

In the beginning of April, a two-week ceasefire was announced so that peace talks can take place. However, these talks were unable to yield any results. The major reason was unclear terms communicated by Pakistan. There was a miscommunication that whether Israel and Lebanon also come under the ambit of ceasefire or not. After the ceasefire was announced, Iran declared the opening of the Strait of Hormuz. However, within a few hours, Iran took a major U-turn and announced that the Strait is again closed. In retaliation, US announced that they will be blocking access to Iran’s port to limit their ability to sell oil. All this chaos and to and fro led to Brent being extremely volatile and hitting a high of $113/bbl.

On the domestic front, India’s goods exports have touched a record high of $442B; India and New Zealand have signed an FTA agreement – boosting bilateral trade; in the MPC meeting of RBI – rates were held steady, citing geo-political risks and increased inflation. The war situation has severely imbalanced India’s BOP position; also, the constant selling by FPIs have put a lot of pressure on the INR, as a result it is in a free fall – breaching the ₹95 mark for the first time.

One of the major events of April – assembly polls in four states and one UT – West Bengal, Assam, Tamil Nadu, Keralam and Puducherry. Only Assam and Puducherry are under BJP control. How the results turn out will have a major impact on the markets. A decisive win by BJP will surely boost the mood on the street, projecting political stability and better coordination between Centre and State.

Another defining and proud moment for India in April has been the achieving of criticality at its Prototype Fast Breeder Reactor (PFBR) at Kalpakkam, Tamil Nadu. This chain reaction has formally ushered India into Stage 2 of its 3-stage Nuclear Power Programme. Stage 2 is the crucial bridge that unlocks India's vast Thorium reserves, multiplying the energy extractable from the same fuel base many times over. Crossing into Stage 2 strengthens energy security through lower import dependence, round-the-clock clean power, and dramatically higher fuel efficiency. Scaling to the 100 GW by 2047 target now hinges on a sharp step up in build rate, backed by enabling policy and legislative reforms.

On the macro side, the RBI has forecasted India’s GDP growth rate at 6.9% for FY27, while IMF and Moody’s predicts it to be at 6.5% and 6% respectively. Industrial growth was at a five-month low and core sector growth has also contracted in April. The strain of war is visible on the economy. On top of this, the IMD has predicted a stronger El Niño (periodic warming of surface waters in the central and eastern equatorial Pacific Ocean, which weakens the southwest monsoon winds that deliver over 70% of India’s annual rainfall) this year which can result in a below normal monsoon – a weak monsoon directly threatens Kharif crop output and rural incomes.

On the international front, US Supreme Court has deemed the tariffs imposed by the President last year in April as illegal, and has asked the administration to start issuing refunds on the tariffs collected so far. However, companies can claim refund but will they pass on the collected benefits back to the consumers is still unclear, the US FED has held rates steady, and one of the most striking developments in international trade has been UAE’s decision to leave OPEC and OPEC+ – a move that can be beneficial for India. This gives the UAE flexibility to produce oil as per their own calculations, not bound by the quota limits imposed by the OPEC.

As of now, the ceasefire has been extended indefinitely. But, the Iranian blockade of the Strait of Hormuz and the American blockade of Iranian ports still remain in place. Both the sides are actively involved in sending proposals to each other to find a middle ground so that the war can be ended. Elevated oil prices and volatility will remain as is unless some conclusion isn’t achieved. However, only time will tell what will happen and till then patience will be your biggest virtue.

www.pinnaclefinvest.com

mohit@pinnaclefinvest.com

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