India’s equity market tumbled on Monday as escalating geopolitical tensions in West Asia kept crude oil prices elevated, with Brent crude surging 8-10% to near $80 per barrel in intraday trade. The BSE Sensex tumbled 3.4% or 2,743.46 points on Monday to hit a low of 78,543.73, while the NSE Nifty dropped 519.4 points, or 2.06% to hit a low of 24,659.25.
The market later trimmed its losses, with the Sensex settling 1,048 points lower at 80,239 and the Nifty closing 313 points lower at 25,866. Investors lost more than Rs 6 lakh crore on Monday as the m-cap of BSE-listed firms dropped to Rs 457 lakh crore from Rs 463.50 lakh crore on Friday.
Market experts feel the Sensex could drop below 75,000 if tensions in West Asia persist for weeks as this could push crude oil prices to the $90-$100 per barrel mark. Given that India is a key importer of oil, higher crude prices are a key macro headwind for the country. This may exert pressure on inflation, currency stability and corporate margins, thereby impacting overall equity market sentiment.
“A sustained war, especially leading to a full closure of the Strait of Hormuz which carries 20% of global oil and 40% of India's crude imports could push Brent crude beyond $100 per barrel, triggering sharp rupee depreciation, imported inflation, and FPI outflows, severely impacting sectors like aviation, chemicals, paints, and OMCs while benefiting upstream oil and gold stocks,” said Vaqarjaved Khan, Senior Fundamental Analyst, Angel One.
Khan added that the Sensex could slide below 75,000 if tensions remain elevated as a $90+ oil shock risks eroding corporate earnings and consumer demand. US President Donald Trump’s remark that the current tensions with Iran may drag on for weeks, and Iran’s continuous attack on oil and gas refineries in the region are adding to an uncertain future.
The fall in the Indian market mirrored the global trend as Asian and European markets traded with sharp cuts on Monday. Futures on the US Dow Jones Industrial Average dropped more than 500 points or 1%.
While equities fell, crude oil prices jumped sharply amid reports of attacks on ships near the Strait of Hormuz. Brent crude, the global benchmark for oil prices, jumped by 10% to touch more than $82 a barrel on Monday while natural gas prices also surged by as much as 25%. After its initial surge, Brent crude came down to $79 a barrel while US-traded oil was up by around 7.6% at $72.20.
Metals were also in high demand as investors rushed towards safe havens. Gold prices surged sharply with MCX touching Rs 168,700 as CME gold rallied close to $5,400, gaining nearly 2%. “Escalating war-like developments across the Middle East have intensified safe-haven demand, keeping bullion firmly bid despite already elevated levels,” said Jateen Trivedi.
The rupee, meanwhile, traded sharply weaker, slipping 0.55% to 91.45 against the US dollar. Analysts said that a surge in oil prices pressured emerging market currencies, particularly India, as it is a major crude importer from the Gulf.