Iran-US conflict: Sensex tanks 900 points; Nifty settles below 24,850
What's the story
The Indian stock market witnessed a major crash on Monday, with the Sensex plummeting by over 900 points. The Nifty 50 index also fell below the 24,850 mark. The sharp decline was triggered by a broad-based selloff amid weak global cues. The BSE Midcap and Smallcap indices also witnessed nearly a percent drop each. The overall market capitalization of BSE-listed companies also took a hit, falling to nearly ₹445 lakh crore from about ₹448 lakh crore in the previous session.
Geopolitical tensions
US-Iran conflict weighs on market sentiment
The recent escalation in the Israel-Iran conflict has shaken market confidence that the war would be short-lived. On Saturday, the US launched a surprise assault on three of Iran's nuclear facilities, further complicating the situation in West Asia. The response from Iran will be crucial in determining how this episode unfolds. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, says "the impact on the market is likely to be limited," despite growing tensions.
Energy concerns
Iran threatens to close Strait of Hormuz
Iran's Supreme National Security Council is reportedly considering closing the Strait of Hormuz, a key global energy supply route. Bloomberg reports that about 20% of the world's daily oil supply flows through this route. The closure could severely disrupt crude oil supplies and significantly impact the economies of major oil importers like India.
Inflation impact
Brent crude oil prices jump over 2%
Brent crude oil prices have jumped over 2% to nearly $79 per barrel amid fears of global supply disruption. Higher crude prices could widen India's trade deficit, fuel inflation, weaken the Indian rupee (INR), raise input costs for companies, and hurt their profitability. The rupee also fell 17 paise to ₹86.72 against the US dollar in early trade on Monday.
Information
Dollar index rises by nearly half a percent
The dollar index rose by nearly half a percent, affecting stock market sentiment. A stronger dollar raises the risk of foreign capital outflows, especially amid geopolitical tensions that make riskier equities less attractive and drive investors toward safe-haven assets.