Dalal Street opened in the red on Monday, starting the week on a bearish note as rising conflict between Iran and the US shook global markets. The S&P BSE Sensex fell sharply in early trade, and the NSE Nifty50 also slipped more than 1%, as investors reacted to the fast-changing situation between the US, Israel and Iran.
The S&P BSE Sensex tanked 884.35 points to 80,402.84, while the NSE Nifty50 dropped 267.45 points to 24,911.20 as of 9:29 am.
This marks the steepest intraday fall for the Nifty since February 1 and for the Sensex since April 7, 2025.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said uncertainty will remain high in the near term.
“The uncertainty related to the war in West Asia will loom large over the market in the near-term. The major risk from the market perspective is the energy risk arising from the surge in crude,” he added.
GLOBAL TENSIONS TRIGGER RISK-OFF MOOD
Markets turned weak after coordinated US–Israel strikes on Iran over the weekend. Reports said Iran retaliated with missile and drone attacks on US bases in the Middle East. The situation has now moved from limited hostilities to active military exchange.
Brent crude surged more than 7% on Monday to the highest level in months. Brent futures climbed to about $82.40 a barrel in early trade. Earlier, Brent had already risen to a 7-month high of around $72.8 per barrel.
Tehran also said it has closed navigation through the Strait of Hormuz, reported news agency Reuters. The Strait of Hormuz handles nearly 20% of global oil flows and more than 40% of India’s crude imports pass through this route. Any disruption here raises fears of supply shortages and higher oil prices.
Rising crude prices hit market sentiment as India imports most of its oil needs. Higher oil prices increase the country’s import bill and can put pressure on the rupee and inflation.
RUPEE WEAKENS, BOND YIELDS RISE
The rupee depreciated against the US dollar in early trade. At the same time, government bond yields moved higher. Rising oil prices increase inflation risk, and higher inflation can push bond yields up. Higher yields often reduce the appeal of equities.
JM Financial Institutional Securities said the situation marks a sharp escalation in Middle East tensions.
“The coordinated US–Israel strikes on Iran mark a sharp escalation in Middle East tensions, shifting the situation from limited hostilities to active military exchange after Iran retaliated with missile and drone attacks on US bases,” JM Financial said.
It added that the reported elimination of Iran’s Supreme Leader and senior security officials increases the risk of further escalation and raises the likelihood of disruption to the Strait of Hormuz.
“While media reports indicate disruption to shipping activity in the Strait, confirmation of a complete and sustained closure remains unclear, making the probability and duration of supply interruption the key variable for markets,” the brokerage noted.
OIL EMERGES AS KEY RISK FOR INDIA
JM Financial said crude oil is now the key macro factor for Indian equities.
“Every USD 1 increase in crude raises India’s annual import bill by approximately USD 2bn. Prolonged tensions may increase logistics and marine insurance costs, disrupt Gulf shipping routes and pressure the trade balance,” it said.
It further added that if disruption in the Strait of Hormuz becomes serious, prices could rise sharply.
“Scenario analysis suggests limited retaliation could add USD 5–10 per barrel; direct damage to Iranian oil infrastructure could add USD 10–12 per barrel; Hormuz disruption could push prices above USD 90 per barrel; and a broader regional war could drive crude beyond USD 100 per barrel,” JM Financial said.
The brokerage warned that markets may shift from earnings-driven to oil-driven trading in the near term.
“Crude remains the key macro variable for Indian equities under the current escalation scenario,” it said.
SECTOR-WISE IMPACT VISIBLE IN EARLY TRADE
All 16 major sectoral indices were in the red in early trade. Broader markets were hit harder. The Nifty small-cap index fell 3.8% while the Nifty mid-cap index declined 3.4%.
Oil marketing companies, paint makers, tyre companies, aviation firms and chemical manufacturers fell due to fears of higher input costs.
As of 9:40 am, BPCL was down 3.5%, HPCL fell 2%, IOC dropped 4% and Reliance Industries declined 1.41%.
Among Sensex stocks, Bharat Electronics Ltd was the only gainer in early trade, rising 1.61%. On the losing side, InterGlobe Aviation Ltd fell 4.24%, Larsen and Toubro Ltd declined 3.45%, Adani Ports and Special Economic Zone Ltd slipped 2.64%, Asian Paints Ltd fell 2.54% and Trent Ltd was down 1.90%.
Meanwhile, upstream oil producers gained as higher crude prices improve their earnings outlook. ONGC rose 5% to Rs 293, while Oil India climbed 4.5% to Rs 505.50 in opening trade. Higher crude prices increase revenue per barrel for producers, which can lift margins.
DEFENCE AND ENERGY MAY SEE SUPPORT
JM Financial said upstream energy and defence stocks may see relative support in this environment, while oil-sensitive sectors could remain under pressure.
“Oil marketing companies, paints, tyres, aviation and chemicals face margin pressure from higher input costs. Upstream oil producers such as ONGC and Oil India may benefit from stronger realisations, while defence names including HAL and BEL could see sentiment support,” it said.
The brokerage said key factors to watch include the intensity of retaliation, whether Brent sustains above $80 per barrel and whether there is any major disruption to Hormuz shipping.
MARKETS MAY REMAIN VOLATILE
Vijaykumar said that indications are that a sharp spike in crude by, say 20%, is likely only if the Hormuz Strait is closed, obstructing oil transport through the strait.
“There is no official confirmation of this yet. If Brent crude remains around $76 equity markets may remain weak but are unlikely to witness big crash,” he said.
He also advised investors not to panic.
“Experience tells us that panic selling during a crisis is wrong strategy. Investors should refrain from selling and watch how things evolve. Data from crises during the last many decades tells us that an event like the present crisis will not have any impact on the market six months later. This is the takeaway from the market behaviour after the recent crises like the Covid crisis, Russia-Ukraine war and the Gaza conflict. The ongoing West Asian crisis is unlikely to be different. However, since a war can spring unexpected surprises, investors have to be cautious. Weakness in the market can be used to slowly accumulate high quality stocks in domestic consumption themes like banking, automobiles, capital goods and defense,” he added.
For now, crude oil prices and developments in the Middle East remain the main triggers for Indian markets. Until there is clarity on oil supply and the Strait of Hormuz, volatility is likely to stay high.
