Financial markets experienced heightened volatility during afternoon trading. On March 5, Beijing time, multiple stock markets saw sharp declines. Dubai's market fell by 4.1%, while Abu Dhabi dropped 2.1%. Hong Kong stocks also trended lower in the afternoon session. Gains in Japanese and South Korean markets narrowed significantly. US stock index futures, which surged overnight, also retreated. Spot silver fell sharply, dropping 3% intraday to $80.48 per ounce.
However, market conditions shifted rapidly. The Europe route container shipping index, which had risen over 18% earlier, plunged dramatically. Subsequently, the Shanghai Futures Exchange's crude oil main contract fell sharply late in the session, with gains narrowing to around 6% after hitting the daily limit up. Stock markets showed some signs of stabilization and recovery following these moves.
On the news front, Iran's Deputy Commander of the Khatam al-Anbia Central Headquarters, Amir Heydari, stated in a March 5 morning interview that Iran has not blocked the Strait of Hormuz. Heydari emphasized that Iran is handling vessel traffic through the strait according to international regulations and existing agreements.
The Islamic Revolutionary Guard Corps reported that a US oil tanker was hit by missiles in the northern Persian Gulf early that day and remained on fire. Iran had previously declared that during wartime, it would control navigation rules in the Strait of Hormuz under relevant international laws and resolutions. The statement prohibited military and commercial vessels belonging to the US, Israel, European countries, and their supporters from passing through the area, warning they would be targeted if detected.
Some media reports indicated that certain Gulf region cargoes are being redirected to Saudi western ports including Jeddah, with the country prepared to handle sudden increases in shipping volume.
The Middle East situation may see unexpected developments, particularly regarding conflict duration. Market expectations of a four-week operation might extend beyond three months. US Central Command is urgently requesting additional intelligence personnel to support prolonged operations against Iran.
Negative impacts are emerging, with India potentially facing initial economic pressure. Reports suggest India confronts multiple challenges including energy costs, aviation disruptions, and reduced overseas remittances as Middle East conflicts escalate. Experts warn prolonged conflict could significantly decrease remittances from the Middle East, further impacting India's economy and currency stability.
India is the world's largest remittance recipient, with inflows accounting for nearly 3.5% of GDP—exceeding its US export proportion of about 2%. Over 9 million Indians residing in the Middle East contribute crucially to India's fiscal and current account balances.
Citigroup research shows Indian expatriates in Gulf countries contribute approximately 38% of India's remittance inflows. Based on projected FY2025 total remittances of $135.4 billion, Gulf contributions would reach about $51.4 billion—comparable to India's $58.2 billion trade surplus with the US. Recent years have seen remittances surpass foreign direct investment inflows. UAE remittances account for nearly one-fifth of India's total, second only to US contributions of 27.7%, highlighting Gulf countries' importance to India's foreign exchange sources.
Beyond remittance risks, India faces rising energy and aviation costs. With approximately 85% crude oil dependency on imports, higher international prices could inflate India's energy import bills. Gulf airspace restrictions have also increased operational costs for Indian airlines.
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