Market volatility gauge India VIX jumps 10% as Iran-Israel war escalates

India VIX, the measure of market volatility in the domestic market, rose as much as 13.9 per cent to 15.97, on Iran-Israel war concerns

India’s volatility gauge jumped over 10 per cent after nearly a month of calm, as the latest flare-up in the Iran-Israel conflict rattled investor sentiment in the equity market.

 

India VIX, the measure of market volatility in the domestic market, rose as much as 13.9 per cent to 15.97, the steepest jump since May 8 this year, according to Bloomberg data.

 

The equity market witnessed heightened volatility as risk-off trades soared, with benchmark indices plunging over 1 per cent. The BSE Sensex tumbled 1,337.5 points in early trade to a low of 80,354.5, while the Nifty50 slipped below the 24,500 mark, touching a low of 24,473 after falling 415 points.

 

 

All the sectors were nursing losses today, with the Nifty Auto, the Nifty PSU Bank, and the Nifty Metal indices down 1.5 per cent each. 

 

India VIX measures the market's expectation of future volatility based on the Nifty50 index options contracts. It typically indicates an increase in market volatility and suggests that investors are expecting higher uncertainty or risk in the near future.

 

The last time volatility spiked over 10 per cent was on June 2, when the US President Donald Trump announced fresh tariffs on steel imports. 

Iran-Israel tensions flare

Israel launched 'Operation Rising Lion' against Iran Friday morning, attacking its nuclear facilities amid escalating tensions between the two West Asian countries. Benjamin Netanyahu said Israel had “struck at the heart of Iran’s nuclear enrichment program” as well as leading nuclear scientists and the ballistic missile program.

 

Israel’s Defence Minister, Israel Katz, declared a state of emergency shortly after the strikes. The head of the Islamic Revolutionary Guard Corps, Hossein Salami, was killed in the strikes, according to reports. 

 

Following the Israeli strike, Iran retaliated with drones, according to media reports. Oil prices rose over 10 per cent and are on course for the biggest weekly gain since 2022. Brent crude price was up 9.66 per cent to $76.00 per barrel.  

What should investors do? 

In the near term, the market will be in a risk-off mode, analysts said. Sectors that use oil derivatives as inputs, like aviation, paints, adhesives and tyres, will be hit hard while oil producers like Oil and Gas Corp. (ONGC) and Oil India will remain resilient, VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said. 

 

Investors can wait and watch how the situation unfolds. Nifty is likely to get strong support at the 24,500 level, Vijayakumar added. 

 

Further, bullish trades also took a back seat after a London-bound Boeing Co. 787 Dreamliner operated by Air India crashed soon after takeoff in Ahmedabad on Thursday.