Nifty wobbled on the US-Iran fragile cease-fire over the SOH control

 

·       After gaining the last two days amid a ‘confirmed’ Iran MOU and the gradual reopening of the SOH and a less hawkish RBI stance, Nifty stumbled.

·       Trump intends to fully control the SOH as a net gain for his Iran war mess, but Iran is not ready to surrender their nuclear option (SOH control).

·       Although a full-scale Iran war may already be over, there may be occasional skirmishes or cease-fire violations due to the respective domestic political compulsions of all the stakeholders.

India’s benchmark stock index Nifty edged down early Monday, June 29, as oil gained on the US-Iran ceasefire break over the weekend over the SOH (Strait of Hormuz) control. The fragile June 17 ceasefire (MOU) between the US and Iran has pushed to the brink of collapse following the tit-for-tat military strikes. Concurrently, Israel continues to launch deadly strikes in southern Lebanon against Iranian proxy Hezbollah despite a freshly signed framework agreement.

US-Iran re-escalation in the Strait of Hormuz (SOH)—Iran is not amused over Trump’s claim of total SOH control.

The conflict flared on Saturday, June 27, the morning after an alleged Iranian drone struck the Panama-flagged oil tanker in the strategically important SOH. Iran alleged non-cooperation from the tanker in adhering to IRGC instructions of ‘safe passage through the southern part of the SOH,' while the US CENTCOM is trying to fully control the SOH. The US (Trump) is also claiming SOH control, something that Iran is vehemently opposing and not ready to surrender. Trump’s SOJ control claim is also not a part (consensus) of the Iran MOU. The US Central Command (CENTCOM) launched two consecutive nights of heavy airstrikes against 10 military targets across southern Iran. The strikes targeted coastal radar systems, air defense positions, drone storage facilities, and communication networks.

Iran's Counter-Attack: Iran’s Islamic Revolutionary Guard Corps (IRGC) responded by launching ballistic missiles and drones at regional US military hubs, targeting the Ali Al Salem Air Base in Kuwait and the US Fifth Fleet naval infrastructure in Bahrain. Although Kuwaiti and Bahraini air defenses intercepted multiple projectiles, Bahrain reported minor damage to a residential building, but US officials confirmed no American casualties or major infrastructure damage.

Israel-Lebanon Border Warfare

Despite a US-backed peace framework agreement signed on Friday, June 26, by Israel and the Lebanese government to progressively withdraw Israeli forces, hostilities have resumed. The Israeli military renewed bombardments 10 kms deep into southern Lebanon, targeting what it called a "security/buffer zone" to confront Hezbollah operators. Over the weekend, the strikes killed at least one person and wounded several others.

Hezbollah leader Naim Qassem explicitly rejected the US-mediated framework deal, branding it null and void because it demands the disarmament of non-state actors. Hezbollah insists that any permanent solution must align with the broader US-Iran Memorandum of Understanding (MoU). The diplomatic track to formalize a final treaty is now quite uncertain.

The Israel-Lebanon Front Dissents.

While the US and Iran have agreed to a temporary pause, the parallel truce between Israel and Lebanon/Hezbollah is facing severe political gridlock. Hezbollah issued a statement reiterating its right to self-defense and slammed the IDF for ongoing border violations and occupations of their ‘motherland’—the 10 km security buffer zone that Israel intends to create.

Berri, the Speaker of the Lebanese Parliament and a prominent Hezbollah ally, declared on Monday (June 29) morning that the US-backed trilateral framework agreement "will not pass" and cannot be implemented in its current form. Berri explicitly branded the deal an "agreement of dictates" because it conditions an Israeli military (IDF) withdrawal on the complete disarmament of Hezbollah.

Trump's Ultimatum:

President Donald Trump has issued aggressive public statements and warnings on Truth Social since late US Friday, June 26, 2026, directly addressing the breakdown of the fragile June 17 cease-fire and condemning Iranian actions in the Strait of Hormuz. US President Trump issued a stern warning on Truth social media, stating that the US military is prepared to "complete the job" and warning that "the Islamic Republic of Iran will no longer exist" if compliance isn't reached. Vice President Vance added that "violence will be met with violence."

·       United States aircraft just struck Iranian missile and drone storage locations and coastal radar sites for violating the Ceasefire Agreement, AGAIN! They may never learn! There may come a point when we are no longer able to be reasonable and will be forced to complete the job we started militarily. If that happens, the Islamic Republic of Iran will no longer exist!

Outlining the "Foolish Violation" late US Friday, Trump posted an initial message slamming Iran's alleged drone strike on a commercial vessel (M/V Ever Lovely) transiting off the coast of Oman as a "foolish violation" of the newly signed Islamabad MOU. Shortly after Trump posted that the US would respond, the US CENTCOM formally executed its first wave of retaliatory bombardments late Friday night, targeting Iranian coastal radar arrays and missile storage facilities. Trump virtually issued a renewed threat of annihilation nukes (Saturday into Sunday)—after another tanker attack on Saturday, Trump intensified his Iran rhetoric.

Iran's Response: Iranian Foreign Minister Abbas Araghchi declared that Iran holds sole authority over maritime traffic in the Strait of Hormuz under the MoU. Following the US strikes, Iranian state television confirmed that Tehran has suspended its participation in technical peace talks currently underway in Switzerland. Commercial flights between Tehran and Dubai are scheduled to resume, but regional air raid alert systems remain active.

Latest Status: The Informal "Stand Down" Agreement

The US and Iran have agreed to an immediate, informal standstill agreement to halt all kinetic strikes, temporarily saving the fragile June 17 Memorandum of Understanding (MoU). Senior US and Trump administration officials confirmed that both nations will "stand down for now" to clear a path for critical emergency technical talks scheduled for Tuesday, June 30. Following a weekend of heavy aerial bombardments and ballistic missile exchanges, high-level backchannel negotiations have successfully paused active hostilities. A senior US official confirmed to Axios that both sides have decided to stop all kinetic activity.

Maritime Access: The SOH

As part of the stand-down agreement, commercial vessels will be allowed to move freely through the global energy chokepoint—the Strait of Hormuz—without the threat of interception or drone strikes by either side (US-Iran). Despite the pause, oil gained amid the extreme fragility of the truce.

All focus now is on Tuesday's Doha Summit over the Strait of Hormuz.

The upcoming US-Iran diplomatic summit on June 30 in Doha is an urgent effort to resolve the SOH control and other confusions that shattered the original June 17 peace roadmap (MOU). The Tuesday talks will focus strictly on administrative control and shipping routes within the Strait of Hormuz (SOH). Tehran continues to demand that all commercial transit strictly utilize Iranian-monitored lanes. This comes after Iran rejected a UN plan to route traffic through Omani waters, which led to the weekend's strikes. US officials stated that technical discussions will expand to revive the broader components of the 14-point MoU, including long-term regional security frameworks, sanctions relief, and nuclear verifications.

Last week, Nifty gained as oil stumbled and RBI Gov. turned less hawkish.

On Thursday, June 25, 2026 ─ India’s benchmark stock index Nifty closed around 24056.00, edging up almost +0.14% after a gain of +0.83% the previous trading day. Nifty recovered by around 1% in the last two days of the truncated week as oil stumbled below $70 pre-Iran war levels amid progress of the US-Iran MOU/deal and gradual normalization of the Strait of Hormuz (SOH).

Nifty was also boosted by fading concerns of tighter monetary policy and rate hikes after RBI Governor Malhotra sounded less hawkish in an interview. On Wednesday, June 24, 2026, soft-spoken and publicity-shy RBI Governor Malhotra said in a rare interview (act of jawboning) that it would be premature to talk about a rate hike.

Malhotra said:

On the RBI stance

·       If we wanted to prepare the market for rate hikes, we would have changed our stance from neutral to restrictive

· If it were so certain that we were going to hike (the repo rate) in the coming months, then we would have changed the stance from neutral to restrictive. We did not do that precisely because there is elevated uncertainty. So I think it will be premature to talk about a rate hike. What we have said is that we are cautious.

·       As of now, what we see is that the inflation is still less than 4% (May reading: 3.93% year-on-year), Most of it due to food. Core inflation is about 2 percent (2.4% or so). But yes, WPI did go up. It was 8.3% in April and 9.7% last month. So we are watching that—if the MPC were sure about the second-round effects of inflation, it would have acted.

·       Again, there is a lot of concentration. A lot of the increase in WPI is because of fuel. Now, whether it generalizes or not is something that we have to wait and watch. That’s why policy lasts; we said this in so many words: that we are looking as to whether or not it generalizes. And accordingly, we make the next policy move.

On India's external finance position

·       The economy was in a much stronger position than during the 2013 taper tantrum episode. He said

·       The current account deficit stood at around 0.6% in the previous financial year against nearly 5% in 2013, while foreign exchange reserves currently provide more than 10 months of import cover.

·       India's foreign exchange reserves were equivalent to about 89% of external debt and exceeded the International Monetary Fund's (IMF’s) reserve adequacy metric.

· Both the current account and capital account remained resilient.

On India's inclusion in global bond indices

·       Most measures required for index inclusion had already been completed.

·       Some investor-friendly steps (recent RBI/Government reforms/recalibration for the GSEC market and NRI deposits) aimed at easing foreign investments were either under implementation or expected to be rolled out over the next few weeks.

On the domestic economy

·       Investment activity remained healthy despite global uncertainties. He pointed to

·       Growth in fixed capital formation and investments across sectors such as defence, renewable energy, hospitality, and shipbuilding.

·       But geopolitical tensions and trade-related uncertainties continued to weigh on sentiment, although there was scope for investment activity to accelerate further as uncertainty eased.

·       Capacity utilization levels remained high, and financing conditions were conducive, with credit, equity capital, and internal cash flows available to support expansion.

Concerns over the migration of household savings towards capital markets

·       The trend of healthiness and diversification of savings was beneficial for both households and investment financing.

·       Bank deposit growth had improved to around 12% and did not pose a constraint to credit growth.

On the issue of banking system resources

·       Banks remained well capitalized and liquid.

·       It is credit which creates deposits---

·       Lending capacity was ultimately constrained by capital and liquidity rather than aggregate deposit growth.

·       RBI investments (for reserve management) were guided by the principles of safety, liquidity, and returns.

·       Gold holdings were primarily intended to meet diversification and stability objectives rather than to benefit from price movements

Market impact

Overall, Nifty gained almost 2.0% in June (to date) after losing 1.8% in May amid lingering uncertainty over the Iran war/truce. Nifty was boosted by banks & financials, realty, Pharma, and infra, while dragged by metals (end of Iran war), techs (AI bubble concern and Nasdaq meltdown), energy (lower oil), and FMCG.

Conclusions

Trump is now frustrated despite the 'nearly complete destruction of Iran’s military'─as per US mainstream media, opposition 'Democrats,' and even some of his own Republicans are criticizing him for the Iran war 'fun/excursion.' No one is ready to digest Trump’s nonsense narrative of Iran’s suspected nukes—to be ready to implode on Israel, Europe, the US, and virtually the rest of the world! Almost all of the US media & politicians are maintaining that the SOH was already open for free traffic even before the Iran war, so what is the outcome of such a costly and needless war, costing billions of dollars and at least 14 US soldiers' lives?

Similarly, even after Trump’s Iran ‘fun’ (war), Iran is not ready to offer any meaningful new concessions, which were not a part of the 2015-JCPOA agreement led by Obama. Trump often criticizes Obama’s JCPOA (Iran deal) for ‘providing billions of dollars in cash,' which eventually facilitates Iran’s proxy terrorism activities, including the late 2024 Hamas abduction at an Israeli music concert, which ultimately leads to the Gaza-Iran war.

Thus, Trump is now planning to occupy/fully control the ‘prized’ and all-important Strait of Hormuz (SOH) at any cost so that he can point out that the SOH was in the control of Iran before the war but is now under the control of the US. But this would be against the letter & spirit of the Islamabad MOU signed on June 17. And Iran is not ready to accept Trump’s claim of full SOH control.

Although Iran may agree to ‘destroy’ the so-called ‘nuclear dust’ in the presence of IAEA/US/China, it may not agree to ‘surrender the SOH nuclear leverage’ to the US. And if Iran withdraws from the nuclear talks, Trump may also launch a precise surgical strike on Iran’s ‘nuclear dust’ locations to ‘destroy’ it and also attempt to occupy Iran’s oil export hub Kharg Island to declare ‘victory’ (September-October) ─ just ahead of the US midterm election in Nov’26.

Bottom line: Fragile US-Iran ceasefire

Although a full-scale Iran war may not happen again, sporadic clashes and counterclashes, including surgical strikes, may not be unusual due to respective domestic political compulsions by all stakeholders (US/Israel/Iran). Israeli PM BB (Netanyahu) may not accept a ‘stronger Iran’ ahead of the September-October general election, while Trump faces the question of his needless Iran war mess, and Iran negotiators (comparatively soft-liners) are also facing huge pressure from hardliners for giving the US and Israel undue concessions.

Technical outlook: Gift Nifty and USDINR

Looking ahead, whatever may be the narrative, technically Gift Nifty Future (CMP: 24088) now has to sustain over 24250-24300 for a further rally to 24500*/24750-24850/24950 and only sustain above 25050, further to 25250/500*-25800-26100/26500* in the coming days; otherwise, sustaining below 24250-24000 Gift Nifty may fall to 23500/23400-23100/23300 and 23000/22500-22300/22000-21800*/21500 and 21000-20600in the coming days (base-best case scenario).

Similarly, USDINR (94.35) now has to sustain over 94.00-93.50, for a recovery to 95.00-97.50 for a further rally to 100/105-107/110 in the coming days; otherwise, sustaining below 93.50, it may again fall to 93.00*/92.50 in the coming days.

 Disclaimer: 

• I have no position or plan to have any position in the above-mentioned financial instruments/assets within the next 72 hours.

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