Markets Take A Hit On Israel-Iran War
The major indices fell on Friday and were down for the week broadly driven by war tensions
On Episode 607 of The Core Report, financial journalist Govindraj Ethiraj talks you through the top business news of the day. We also feature an excerpt from our recent weekend edition featuring Anshul Jain, Chief Executive – India, SE Asia & APAC Tenant Representation at Cushman & Wakefield.
SHOW NOTES
(00:00) The Take
(05:19) Markets take hit on Israel-Iran war, uncertainty returns
(08:34) Oil prices zoom, bigger concern than stockmarkets
(09:57) India holds back rare earth exports to Japan
(13:26) The world’s hottest office space market is…
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday the 16th of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital but presently in transit.
The Take
A pilot friend posted on a common group saying that the verdict on how the Ahmedabad, London Air India Boeing 787 Dreamliner crashed barely a minute after takeoff is already out and that is if you were to believe the self-styled experts posting on social media or opining on television channels. Another set of pilots was convinced it was an equipment failure of some sort arising out of alleged maintenance oversight.
Moreover, they believed quite strongly that the airline would try to cover it up. And by the way, the pilots who argued that Air India would cover up any organisational maintenance or related lapse were active Air India pilots. Now, there is not enough information at this point to establish what really happened on that afternoon of June 12th, 2025 on a hot Indian summer day which caused the aircraft to fall out of the sky onto a medical college hostel near the airport.
At last count, some 270 people have died in one of India's worst aviation disasters after that Boeing 787 slammed into a medical college hostel in a residential area in the northwestern part of Ahmedabad minutes after takeoff on Thursday and killed about 241 people on board and about 29 on ground. One passenger has survived. As an aside, expert YouTubers have been dissecting every bit of video and the audio they can get hold of and putting out analysis which is obviously slipstreaming into the social universe.
One pilot and YouTuber who says he flies Boeing 777 concluded that pilot error was possible but he did add that was his opinion at that point. A day later he posted again saying that the fact that the ram air turbine was running suggested a total power loss and thus increasing the chance of equipment failure and reducing the possibility of pilot error. And now it is also known that there was a clear Mayday call referring to failure in thrust.
So those are of course technical points but his and when I say his I mean the YouTuber's disclaimers on both posts does not really matter in the larger scheme of things as views like his coalesce into the larger whirlpool of noise around the event as expert opinion transitions into expert theory in other people's words. The media is a key culprit here. Speaking of which Air India CEO Campbell Wilson was reasonably quick to put out a video message to the world at large by 7 pm that evening and that's reasonably quick in the context of how long top management usually takes to stand up and own up to the problem even if the cause is not known.
But the accident and the aftermath reflects the challenge Air India continues to face within three years after it changed owners from the government of India to the Tatas. While most pilots are loyal to their passion and skill rather than the airline they work for it is no secret that Air India pilots carry a level of disgruntlement higher than the average and unusual for their role in service. It's not pilots alone.
Air India's toxic culture created and nurtured in the times of government ownership had spread to almost every department over the years. Air India had some or close to 20 unions of all shapes and sizes once including of course pilots and that too was divided into older pilots and younger pilots. Much of this has of course changed even as Air India has churned staff rapidly post the Tatas taking over and this is quite evident and visible both on ground and on air in the last few years.
There are many old timers including pilots who've been around for a long time and unusually the change in ownership has not changed their view of the owner whether government in the past or the Tatas now. It is difficult to say from the outside what drives this deep angst except to note that it is there and at levels that are not healthy. The angst is visible within cockpits too not in the flying of the aircraft but in the complete silence in communication sometimes between pilots and of course to the passengers who are on the aircraft.
I recall a JFK Delhi flight where there was not a single announcement made from the cockpit, definitely not before take off or before landing when it is usually customary for captains and pilots to do so. I asked a few pilots about this particular silence and they said that while pilots were not under any mandatory rule to speak to passengers, most did so anywhere in the world. So to come back to the culture within the findings of the investigations will unfortunately lead to much blame being passed around.
Now this is regardless of on whom or where the hammer lands and going by the past expect political involvement and mud flinging as well. So the Tatas obviously realised this and have offered one crore rupees ex gratia payments to the families of all those on the aircraft and killed on ground where the plane crashed. But whatever the findings the Tatas will have to lead from the back so to speak and focus on the rank and file as they transition this challenging phase.
The external blame game is beyond the Tatas control but the internal drifts and stress is something that they have to get a grip on if the airline has to emerge from this unfortunate and sad phase. The handling of this will be a lesson for other businesses and business leaders and their organisations as well.
And that brings us to the top stories and themes.
The stock markets take a hit on the Israel-Iran war uncertainty returns.
Oil prices are a bigger concern than stock markets for India right now.
The dollar strengthens even as the rupee slides.
India holds back rare earth exports to Japan.
And the hottest office space market in the world is.
The Markets Fall On Friday
The major indices fell on Friday and were down for the week broadly driven by war tensions which are of course back on the radar now. The markets had already turned weak on Thursday and resumed sliding on Friday heading down as Israel continued to strike Iran and the latter retaliated. The biggest casualty was of course oil prices which shot up closing finally about seven and a half percent up after having gone up even further and have now crossed $74 a barrel.
Iran is a big oil producer and more on that shortly. The nifty 50 was down about 169 points to 24,718 and the sensex was down 573 points to 81,118 on Friday. All in all the markets seem a little at least at this point resilient to what is happening around us.
Oil marketing companies like BPCL and HPCL lost on worries that higher crude prices would hit refining margins. High oil prices are at this point a concern because this was one of those macroeconomic signals that was green and now is seemingly turning orange. Global equities also fell on Friday while safe havens like gold and the Swiss franc and dollar as well gained and more on that shortly.
Israel said it struck Iranian nuclear targets to block Tehran from developing atomic weapons, prompting retaliation from Iran, which launched about 100 drones. And in the markets, airline stocks into global aviation or IndiGo and SpiceJet lost between four and one and a half percent after that Air India plane crash in Amdabad on Thursday. Both airline stocks have lost more than six and a half and three and a half percent in two sessions, according to Reuters.
And for the week, the Nifty and Nifty lost about one percent each. Meanwhile, uncertainty on the trade deal continues. The U.S.-China trade deal is lacking in details, and the India-U.S. one is still on the burner with no clear deadline in sight — or rather, many deadlines have already passed.
Meanwhile, on Wall Street, uncertainty has reduced to the market, which was otherwise ignoring everything else and galloping on, even as oil prices spiked. On Friday, the yield on 10-year Treasuries halted a four-day slide and started rising again. The CBOE Volatility Index, or VIX, was above 20. As for stocks, they were relatively subdued until selling pressure hit at the end of the day, sending the S&P 500 down 1.1%, according to CNBC, which added that this still remains about three percent away from the record.
Now back home, the rupee was down below the 86 mark on Friday, hitting a two-month low thanks to that jump in crude oil prices, which obviously affected sentiment. So the rupee fell about 49 paise to close at 86 rupees 9 paise on the dollar, after closing at 85 rupees 60 paise on Thursday, according to Bloomberg.
Not surprisingly, the U.S. dollar has rallied on Friday after trading around a three-year low the previous day, as investors moved to safe haven assets — as we just discussed following those airstrikes. According to CNBC, the dollar index, which measures the greenback against a basket of major peers, was seen slightly higher on Friday, trading around 98.19.
Oil Is Back
First, the forecasts. Analysts at Goldman Sachs have raised their oil price forecasts for the coming months by about two to three dollars a barrel and laid out scenarios which range from above a hundred dollars a barrel in the worst case, to below fifty dollars a barrel in the most bearish scenario. Make of that what you will.
A note quoted by Bloomberg says that the potential of further escalation in the Middle East implies that the short-term risks to our price forecast are now skewed to the upside — though they still maintain their call for prices to drop below sixty dollars by the fourth quarter of this year. Which means that, computing on the basis of demand and supply, oil prices are still looking weak at this point.
Another report in Bloomberg says that the latest assault by Israel is putting oil traders’ nonchalance to the test. Even as there has been no impact on supply so far, the strikes have shaken a market which was otherwise focused on a looming surplus driving down prices, with the Organisation of Petroleum Exporting Countries Plus quickly unwinding production cuts and output rising elsewhere — from Brazil to Guiana. And, of course, a trade war that could hit demand.
A surge of trading in out-of-the-money call options, says Bloomberg, showed that many were seeking to hedge against the possibility of a price spike. The other worry for the market is a disruption of shipping through the Strait of Hormuz, through which about one-fifth of global oil supply flows. But analysts also say — or told Bloomberg — that this seemed unlikely.
India Wants To Suspend Rare Earth Exports
India has asked the state-run miner IREL to suspend a 13-year-old agreement on rare earth exports to Japan and to safeguard supplies for domestic needs, according to Reuters. Thus, reduce India’s dependence on China. Now China is the leader of the critical mineral supply chain, as we’ve been discussing. It produces roughly 60% of the world supply of rare earths and processes about 90%, which means that it's importing these materials from other countries and then refining them.
IREL also wants to develop India’s capacity for rare earth processing, which is dominated globally by China and has become a weapon — as we’ve seen in the rising trade wars. China has curbed its rare earth materials exports since April, putting pressure on automakers and other high-tech companies worldwide.
In a recent meeting with auto and other industry executives, India’s commerce minister asked IREL to stop its exports of rare earths — mainly neodymium, a key material used in magnets for electric vehicle motors — according to that Reuters report.
Under a 2012 agreement, IREL supplies rare earths to Toyotsu Rare Earths India, a unit of Japanese trading house Toyota Tsusho, which processes them for export to Japan, where used to make magnets. So this is an interesting supply chain insight which I guess we would not have known of unless something like this had happened.
So in 2024, Toyotsu apparently shipped about 1,000 tonnes of rare earth materials to Japan, and this is about one-third of the 2,900 tonnes mined by IREL — though Japan relies mainly on China for the majority of its rare earths needs.
So the reason IREL has been exporting rare earths is because of a lack of domestic processing capacity. But following, obviously, those disruptions to supplies of Chinese materials, it wants to see if we can keep those REEs at home and expand domestic mining and processing, Reuters said.
On the other hand, India may not be able to immediately stop supplies to Japan because they do fall under a bilateral government agreement. And IREL wants this to be amicably decided and negotiated, because Japan is a friendly nation, that source told Reuters.
Meanwhile, CNBC is reporting that China’s dominance of the global rare earth supply chain will not dwindle easily — even if Beijing decides to approve more export licences through deals with Europe and the United States.
Three Shenzhen-listed Chinese companies this month said Beijing approved their exports of magnets with rare earths — that are metals which are useful for cars, defence, semiconductors, and high-tech products. But another firm said last month the export licences can be used for only one shipment.
So, in Europe, automotive industries have said that in the case of magnets and heavy rare earths, long-term export licences from China were only valid for a maximum of six months. This also obviously gives you a sense on where the logjam is — which is procedures. And of course, those procedures did not exist in these forms a few months ago.
An economist at Dutch bank ING told CNBC that diversifying away from Chinese sourcing of rare earths is likely to be extremely difficult and at best a limited long-term solution. Europe, for example, produces no rare earths and the U.S. has only recently begun small-scale production of neodymium and praseodymium. However, both regions hold only a fraction of global reserves, limiting their ability to scale up.
So earlier, we had of course discussed how China had announced export controls on seven rare earths in early April, following a series of tighter restrictions in the last two years on a broad range of critical minerals. So, while the efforts are of restrictions aimed against the United States — because it’s happening at the customs end — it’s really affecting many more countries, including India.
Office Space Is Booming
India’s office space market is exploding — the highest in the world, and more than the United States. So there are interesting reasons why this is happening, including economic growth and prospects in India.
So what are the reasons for India becoming the world's largest office space absorber at this point? I reached out to Anshul Jain, CEO of India, Southeast Asia and APAC Tenant Representation, Singapore — and based out of Singapore — and I began by asking him this precise question.
INTERVIEW TRANSCRIPT
Anshul Jain: One is domestic consumption-related growth — that both Indian companies as well as foreign companies, which are servicing the Indian market, are on a growth path. And the second trend is foreign companies opening their global capability centres and offshoring centres in India to take advantage of the skill base, to sort of innovate products and processes across the world.
So I think there's a demand side of the story here with those two aspects. There is another part of the story where your question was, you know, India is the largest absorber and why is that?
The second reason also is the demand from some of the biggest countries in the world has gone down post-COVID. So if you think about U.S., which is the largest office market in the world, post-COVID it has just not returned to its glory days — and there's actually, in most years post-COVID, U.S. has been on negative absorption, which means that people are kind of giving up more space than they're taking space.
And you think about the other massive engine of growth that the world had — was China — and China hasn't been growing as fast as the world has been used to. So you have those two guzzlers of space kind of going down, and you have sort of India, which has really kicked up post-COVID as a result of multiple factors, which has kind of resulted in India being the largest absorber of space at the moment
Govindraj Ethiraj: Right. And can you give us a sense on what kind of base we're talking about — from which we're seeing the kind of growth that we are seeing right now in India versus, let's say, five years ago?
Anshul Jain: Yeah, so if you think about average absorption and average gross absorption pre-COVID, right — so if I roughly look at 2016 to 2019 numbers, average yearly gross absorption was in the order of, let's say, 50 to 60 million square feet, give or take. And you kind of think about the years '22 to '24 — the average yearly absorption has kicked up to 70 to 80 million square feet. In fact, in the year '24, it was almost touching 90 million square feet, right?
So you think about that average movement — that’s almost about 20 million square foot delta, 20–25 million square foot delta from pre-COVID three years to post-COVID three years.
Govindraj Ethiraj: And how much would this be a churn? As in, are we saying that 20 million square feet, let’s say, is the growth — 50 million to 70 or 70 to 80 — or what is the usual proportion of it which is, let's say, old office space that’s coming back into the market?
Anshul Jain: No, so this is the demand side I'm talking about. Right. And from a demand perspective, there's another barometer we use — this is net absorption. And net absorption really means what’s the net new space that is getting absorbed, right? And that’s gross absorption minus the churn space, as you call it.
So the net absorption also has moved up. So pre-COVID, the net absorption was about 33–34 million square feet, and the same figure for post-COVID has been about 50 million square feet. So even the net absorption on an average has gone up by 15 to 17 million a year, which represents almost a 30 to 40 percent increase on net absorption.
Now the reason for that also is that a lot of companies are moving from older space to newer space, right? So there’s definitely an element of that, and then there’s an element of expansion. So I think when you look at the gross absorption, net absorption, it kind of clears the picture.
Govindraj Ethiraj: And which parts of India are leading this? So you refer to GCCs earlier — could GCCs be the largest component of this driver, or are they halfway? Where does it stand?
Anshul Jain: The GCCs are now contributing almost a third of Indian demand. So last year, I think, GCCs tapped off at about 25-odd million square feet of the sort of 80-plus or 85 million-odd square foot absorbed. So I’d say, you know, just under a third — which is quite significant.
And you know, there were almost 250 new GCCs which sort of, you know, formed last year. So that’s a significant part of demand coming in. And they basically span across sectors, right? So whether it’s for the banking sector, whether it’s healthcare, pharma, whether it’s engineering, manufacturing, research, and so on and so forth — so that clearly is significant from a type of work perspective.
If we look at the industry segments which are growing, whether it’s GCC or non-GCC — BFSI (banking and financial sector) has really taken a big lead last year. Engineering, manufacturing companies, you know, pharma, healthcare have been another major contributor. And the regular IT-BPM still makes up about sort of, you know, 30-odd percent of the demand.
Govindraj Ethiraj: So you’re saying that IT-BPM — which is business process management and information technology — the classic way we know it — is still roughly a third of the market?
Anshul Jain: Yeah. So it's probably tapering off a bit. It used to be 30 to 33 percent — it's kind of down to about 27–28 percent — but still significant.
Govindraj Ethiraj: Yeah. Which, I mean, I'm just trying to correlate it to, let's say, the perception that IT industries have slowed down hiring — and some of them are actually in the negative now, compared to where they were. And definitely we're not growing — at least in bodies — the way we were growing until about three or four years ago.
Anshul Jain: For sure. But you're looking at — probably when you look at these figures — you're looking at the top five or top six sort of, you know, big IT companies. But, you know, when we look at our figures, they stretch across different sorts of segments, and smaller players get involved in that as well.
So I think there's a small difference there. And plus, when we say IT-BPM, it also is sort of IT software development and so on and so forth. It’s not necessarily just the BPM industry.
