White House trade adviser Navarro stated that India should stop funding Russia by buying its oil. He stressed that India’s actions should match those of a US strategic partner. Navarro added that for India to be recognized as a strategic ally, it must change its current behavior. This reflects the US’s expectations for its partners on the global stage.

Rising Geopolitical Tension

We see this as a clear sign of increasing geopolitical tension, which will likely raise energy market risks. This rhetoric specifically targets India’s energy policy, crucial for stabilizing global crude demand. Traders should prepare for more volatility in Brent and WTI crude futures in the coming weeks. The most immediate effect will be on oil prices, so we should consider positioning ourselves for potential price increases. Looking back at how the markets responded to supply threats in early 2022, even small disruptions pushed oil prices up by $5 to $10 per barrel. We advise buying near-term call options on oil ETFs or crude futures to take advantage of this potential. This pressure could also weaken the Indian Rupee against the US dollar. If tensions escalate, we may see capital flowing out of Indian stocks. Data shows that the USD/INR exchange rate is very sensitive to geopolitical developments. Traders might want to use currency futures or options to hedge against, or profit from, a possible decline in the rupee from its current level of about 84.5.

India’s Strategic Importance

India’s role in the oil market is crucial, as it has been one of the largest buyers of Russian seaborne crude since 2023, often importing over 1.5 million barrels per day. This supply has helped the Indian government control inflation, which the Reserve Bank of India has kept below 5% for the last quarter. A forced cut in these purchases would tighten global supply and severely impact India’s economy. The stakes are very high. The US-India trade relationship has strengthened, with bilateral trade surpassing $200 billion in 2024. This statement raises questions about that economic partnership, creating uncertainty that is likely to increase the India VIX volatility index. Traders should closely monitor any further communications from Washington and New Delhi, as these will drive market movements. Create your live VT Markets account and start trading now.

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