THIS AFTERNOON: Indian government hikes diesel, jet fuel windfall taxes

Good morning, lovely people. The mood shift following the US-Iran interim peace agreement is evident across the MENA-India corridor. Indian equities marked a third consecutive session of gains, with Nifty 50 gaining 3.6% and Sensex up 4% since Monday. The INR also gained to a six-week high of 94.43 to the greenback.

The big story today: Indian refiners actively redrew their supply map during the Iran war, bypassing the Strait of Hormuz in favor of alternative Gulf transit hubs like Yanbu and Fujairah to secure crude oil flows.

On the India-UAE front: The India-UAE local-currency settlement mechanism has crossed a major milestone, with more than 15% of bilateral trade now successfully bypassing the USD.

Plus: Gulf SWF-backed Reliance Jio is inching towards a USD 4 bn listing, a highly anticipated move that will serve as a barometer for India’s capital markets.

More taxes on fuel exports

The Finance Ministry of India has raised windfall taxes on diesel and aviation turbine fuel (ATF) exports for the fortnight beginning yesterday, while keeping the levy on gasoline exports unchanged, Reuters reports. Excise duties on gasoline and diesel sold in the domestic market will also remain unchanged. The levies are reviewed every fortnight based on global crude and fuel prices.

By the numbers: Export duty on diesel has been raised by 3.7% per liter, and the duty on ATF saw a 31.6% hike.

Why it matters: The latest increase comes on the back of elevated refining margins for diesel and jet fuel, despite recent volatility in global oil markets. India introduced export duties in late March as the Iran war raised concerns over domestic fuel availability. The rolling fortnightly reviews are intended to disincentivize exports and protect local reserves.

India buys 6 mn Adnoc barrels

Adnoc appears to be making up for its lost market share. Indian refiners purchased some 6 mn barrels as the Emirati company sold at least 30 mn barrels of spot crude to Asian refiners and trading houses so far in June, Reuters reports, citing trade sources in the know. Adnoc has been looking to boost its exports during the ceasefire, with more barrels being offered this week. The sales include Das, Upper Zakum, and Umm Lulu crude for June-August loading.

Who’s buying? State-run Indian Oil and Bharat Petroleum were among the buyers. China’s Unipec reportedly bought 6-8 mn barrels of Upper Zakum crude. South Korea’s SK Energy took 7 mn barrels of Umm Lulu crude, while Japan’s Eneos bought 3 mn barrels of Das crude.

IN CONTEXT- The sales come after Adnoc spent much of the conflict finding workarounds for exports from fields inside the Gulf. The company moved cargoes through Hormuz with transponders switched off and relied on ship-to-ship transfers outside the Gulf to reach buyers. Adnoc had also cut exports by more than 1 mn bbl / d from pre-war levels as disruptions hit flows through the strait, Reuters reports separately.

RBI eases investment rules for overseas Indians

The Reserve Bank of India (RBI) is simplifying investment procedures for overseas Indian investors to pull more foreign capital into Indian markets. Under the amended rules, in effect since 13 June, foreign-based individuals can now maintain a single designated repatriable INR account used exclusively for permitted Indian investments. The amendment also clears the regulatory processes for Indian companies listed on international exchanges, allowing subscription proceeds to be remitted directly to bank accounts in India or held in offshore foreign currency accounts.

Why it matters: This significantly lowers onboarding and regulatory compliance for high-net-worth Indian diaspora members living in the Gulf who are looking to invest in capital markets at home. The RBI has eliminated several multi-layered banking frictions and simplified reporting requirements for cross-border investments. For wealth managers, private banks, and fintech platforms operating across the MENA-India corridor, this allows for an easier process — with direct repatriation of sale proceeds from mutual funds, equity instruments, and the National Pension System into these designated accounts.

The big story abroad

The details of the US-Iran agreement are out, headlined by a USD 300 bn development fund designed to jumpstart investment into Iran. The private investment vehicle — aimed to incentivize both sides to work on a final agreement — is already halfway committed, sources tell Reuters, and will focus on energy, logistics, manufacturing, and transport. Under the terms, the US will also release all frozen Iranian funds and assets and lift all sanctions.

The Hormuz outlook: Upon signing the framework agreement this Friday, the US will lift its naval blockade and — alongside Iran — ensure traffic through the Strait of Hormuz reach pre-war level within 30 days.

The Nuclear equation: While Tehran reiterated that it will never produce nuclear weapons, the fate of enriched material and other mutually agreed nuclear issues will be tackled in the final agreement.

What’s next? Once the initial framework is inked, the two sides will have 60 days to reach a final agreement. Bloomberg has the complete text of the 14-point draft agreement here.

And in business news: SpaceX extended its rally during yesterday’s session, dethroning Amazon to become the fifth most valuable company in the world. The company saw its valuation reach almost USD 3 tn during trading, before ending the session at USD 2.7 tn.

Eyes on the Fed: The US Federal Reserve concludes its first policy meeting under new Chair Kevin Warsh today. While markets expect the central bank to hold rates steady, Warsh’s debut post-meeting presser is what we’ll be watching closely for his first substantive comment on inflation and employment.

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