Mkts brace for more turbulence as Iran war shows no signs of de-escalation

Escalating conflict, rising oil prices and rupee pressure likely to keep markets volatile as investors turn cautious amid global uncertainty

The Indian equity market is likely to open with a gap down on Monday and could face another turbulent week, as the Iran war shows no signs of de-escalation.

 

Over the weekend, US President Donald Trump threatened to attack Iran’s power plants if the country did not reopen the Strait of Hormuz. Iran, on the other hand, warned it would strike key infrastructure across West Asia if the threat is carried out. The war, now in its fourth week, has disrupted oil prices and kept global equity markets on tenterhooks.

 

Shipments of oil through the Strait of Hormuz, which handles transit for about 20 per cent of the world’s oil and gas, have come to a virtual halt. 

Brent crude prices have risen 44.6 per cent since the war began, closing at $106.9 per barrel on Friday.

 

Indian equity benchmarks, the BSE Sensex and the Nifty 50, have declined 8.3 per cent and 8.2 per cent, respectively, since the beginning of the war. Both indices have entered correction territory, with the Sensex down 13 per cent from its closing high and the Nifty down 12 per cent

 

The longer the war drags on, the worse it could be for India in terms of inflation, the balance of payments, and rupee depreciation, given that the country is a major net importer of oil. The rupee on Friday hit a fresh low of 93.72 against the US dollar.

 

Indian equities were already facing multiple headwinds, and the West Asia conflict has further dampened investor sentiment.

 

“It depends on how events unfold in West Asia. As of now, things have worsened, and that should be reflected in Monday’s opening. It does not look like either side is backing down, and we do not see any peace mediation either. If the blockade of the Strait of Hormuz is resolved, then things could look a bit better for us,” said U R Bhat, cofounder of Alphaniti Fintech.

 

The war has also pushed foreign portfolio investors (FPIs) back into riskoff mode. FPIs were net sellers worth about ₹82,700 crore in March, their largest monthly net selling since October 2024.

 

Bhat noted that FPIs face losses even without selling because of rupee depreciation. As oil and general prices rise, corporate profits come under pressure, making investors cautious until market stability returns.

 

The war has also upended expectations of a corporate profit revival in the next financial year, which had been seen as a potential catalyst for a market upmove.

 

“All the double-digit profit growth assumptions will have to be revisited, as no one had factored in the Iran war, and certainly not the extent of its disruption to energy prices. Earnings downgrades are likely once the earnings season begins next month,” said Ambareesh Baliga, an independent equity analyst.

 

Baliga added that investors could consider increasing positions in high-conviction stocks, as valuations now appear more attractive, while remaining prepared for further volatility.

 

“For those sitting on some cash, if you are not investing now, you may never invest. No one knows the bottom, and one has to accept that you will never buy exactly at the bottom,” he said.

 

However, some experts advised caution, saying investors should wait for the situation to stabilise before taking active positions.

 

“Once there is clarity on the resolution of the war, markets will bounce back, but you cannot time the bottom. For retail investors, it may be better to wait because even if they have to pay 3-4 per cent more after the recovery, it could still be worth the reduced risk,” Bhat said. 

 

Bitcoin drops below $69,000 

Bitcoin and other cryptocurrencies fell anew as the US, Israel and Iran traded fresh threats and attacks. 

The largest coin fell as much as 3.3 per cent on Sunday to trade around $68,150, the lowest level since early March. The selloff was fiercer among other tokens, with Ether losing nearly 5 per cent to sink to $2,050 and Solana, XRP, and Cardano also dropping. 

Bitcoin has sold off since the start of the war, losing roughly 20 per cent since the US and Israel started their attacks on Iran at the end of February. 

During the war, the crypto market — which trades 24/7 — has offered traders a weekend view into how other assets might trade once traditional markets open. 

Perpetual futures on Hyperliquid, a crypto exchange that has become one of the largest venues for around-the-clock derivatives trading, on Sunday showed oil-linked contracts trading higher by more than 2 per cent to $98 a barrel, as of 9 am in New York. [Bloomberg]