Mini Feature IRAN WAR – LONG-TERM EFFECTS

By: Dr K C Gupta, YBB Personal Finance

CONTRARIAN INDICATORS

AAII Bull-Bear Spread -1.0% (below average)
CNN Fear & Greed Index 64 (greed)
NYSE %Above 50-dMA 61.75% (positive)
SP500 %Above 50-dMA 66.40% (positive)

ICI Fund Allocations (Cumulative), 6/30/26
OEFs & ETFs: Stocks 63.07%, Hybrids 3.86%, Bonds 16.93%, M-Mkt 16.15%

INTEREST RATES

CME FedWatch
Cycle peak 5.25-5.50%
Current 3.50-3.75%
FOMC 9/16/26+ hold
FOMC 10/28/26+ hike

Treasury

T-Bills 3-mo yield 3.87%, 1-yr 4.01%; T-Notes 2-yr 4.19%, 5-yr 4.35%, 10-yr 4.65%; T-Bonds 30-yr 5.19% (normal yield-curve);
TIPS/Real yields 5-yr 2.13%, 10-yr 2.40%, 30-yr 2.96%
FRNs Index 3.786%

Bank Rates www.depositaccounts.com/

Stable-Value (SV) Rates, 8/1/26
TIAA Traditional Annuity (Accumulation) Rates
Restricted RC 5.25%, RA 5.00%
Flexible RCP 4.50%, SRA 4.25%, IRA-101110+ 4.15%
TIAA MYGA 4.60% (3-yr), 4.80% (5-yr), 4.85% (7-yr)
TSP G Fund 4.875% (previous 4.500%)

India Fear & Greed MMI 81.93 (extreme greed)
Weekly ETFs: INDA +1.13%, INDY +1.21%, EPI +1.61%, INDH +0.97% | SPY +3.51%

The data above are as of Sunday preceding the publication date.

FINANCIALS

RBI MPC held repo rates at 5.25%; projections: CPI +5.0%, GDP +6.7%.

Kotak Mahindra Bank is buying Deutsche Bank’s (DB) India retail & wealth management businesses (16 of 17 branches; 1,000 employees). DB-India will continue operations in corporate & investment banking in India. In a similar vein, Citibank-India sold its consumer banking business to Axis Bank in 2023. Deregulation in financials (banking, investments, insurance) has meant that foreign companies in India are focusing on their stronger areas & disposing weaker areas.

FINTECH

Singapore’s MacRitchie (affiliated with Singapore’s sovereign investment company Temasek) is reducing stake in Indian PB Fintech from 6.48% to 3.88%. Shares may be offered with up to 4.6% discount & the remaining holdings will be subject to 60-day lockup. PB Fintech owns Policybazar (online insurance & investments) & Paisabazar (online lending). These companies operate as quote services, or insurance & credit aggregators, for many 3rd parties.

INDUSTRIALS

Adani Enterprises & French Dioxycle partner for low-carbon chemicals. A pilot plant will produce formic acid (used in textiles, agriculture & manufacturing) using renewable energy & captured carbon ​dioxide & the collaboration will later launch commercial-scale manufacturing. The collaboration will also explore ‌the ⁠production of other emissions-reducing chemicals used in various industries.

INFRASTRUCTURE

UK Shell sold Spring Energy renewables (Solar & wind power) unit in India to Aditya Birla Renewables (Grasim Industries) & BlackRock Global Infrastructure Partners. Shell moved into renewables early but is now going back to its core fossil fuels, processing & servicing businesses.

IT/TECH

Indian visa processing contractor VFS Global is using AI for processing 45,000 visas/day. The final visa decisions are by Indian embassies/consulates.

SPECIAL TOPIC – IRAN WAR – LONG-TERM EFFECTS

Wars have deaths & destruction. There are also long-term economic effects.

Iran war started out as a brief war but now is dragging on.

Iran has held against vastly superior US military power through the use of homegrown drones, missiles & speedboats. It has disrupted traffic through the Straits of Hormuz & Bab al-Mandeb.

So, it’s time to assess long-term effects of a potentially long US-Iran war.

The immediate effects are from disruptions in oil & natural gas/LNG production & shipments. LNG requires special facilities & ships & it’s hard to ramp up global production. Damaged facilities will take time to repair. It may be months after the end of Iran war for Middle Eastern (ME) oil/gas shipments to reach pre-war levels.

If these Straits remains closed, there will be buildups of oil inventories & production will have to be cut.

Several ME countries expanded into the production of fertilizers ingredients (ammonia, urea, etc), industrial chemicals & gases, & those now face delivery problems.

There are large desalination plants to support ME population in many areas. Any damage to those may make many ME cities inhabitable.

Delivery problems for pharma were a surprise. Trading houses in ME became prominent aggregators & distributors of pharma APIs (active pharmaceutical ingredients) from China, India, etc. This may have been a convenient way to mask API origins, but now, huge amounts of APIs are sitting in ME warehouses, some with expiration dates.

Oil/gas importing countries include developed countries (Europe, parts of Asia including Japan) & EMs (China, India, parts of Asia). Some country SPRs have rather low levels of reserves (India) & they are forced to buy oil/gas at high spot prices. Japan has the largest SPR with almost a full year supply.

Inflationary impacts will be seeping through global economy through higher prices for energy & many goods & services. Adverse economic impacts will lead to several weak currencies.

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