Domestic mkts rattled as Gulf unrest deepens; Sensex hits 6-month low

The Sensex and Nifty hit multi-month lows as West Asia tensions sent crude prices surging and sparked a flight to safe assets, with volatility jumping to a nine-month high

The benchmark Sensex on Monday plunged over 3 per cent intraday to its lowest level in six months, as escalating tensions in West Asia sent crude oil prices soaring and triggered a flight to safe-haven assets.

 

Although domestic markets staged a sharp rebound from the day’s lows on hopes of potential de-escalation, sentiment remained fragile after reports of fresh explosions in several Gulf cities, raising the risk of a prolonged conflict.

 

After sliding to an intraday low of 78,544, the Sensex recovered to close at 80,239, down 1,048 points, or 1.3 per cent. The Nifty hit a low of 24,604 before settling at 24,866, down 313 points, or 1.24 per cent. This marked the lowest closing level for the Sensex since September 2, 2025, and for the Nifty since February 1. India’s total market capitalisation declined by ₹6.6 trillion to ₹456.9 trillion ($4.99 trillion).

 

 

Foreign portfolio investors (FPIs) were net sellers to the tune of ₹3,300 crore, while domestic institutional investors cushioned the fall with net purchases of ₹8,594 crore.

 

Brent crude jumped as much as 10 per cent to $82 a barrel, while natural gas prices surged 25 per cent after Iran warned vessels against transiting the Strait of Hormuz, a key route handling roughly a fifth of global oil and gas shipments. European markets fell over 2 per cent, while most Asian indices ended about 1 per cent lower.

 

Analysts cautioned that a sustained spike in crude could upset India’s macroeconomic (macro) balance by stoking inflation, delaying rate cuts, and dampening consumption.

 

“For India, higher oil prices translate into pressure on the rupee, a wider current account deficit, sticky inflation, and the risk of FPI outflows — all of which justify the immediate correction,” said Seshadri Sen, head of research and strategist at Emkay Global Financial Services.

 

“If the conflict remains contained to a short one- to two-week episode, history suggests markets can rebound sharply once clarity emerges, similar to prior geopolitical shocks. A prolonged conflict, however, would materially raise macro and earnings risks,” he added.

 

Oil-sensitive sectors bore the brunt of the selling. Shares of aviation major InterGlobe Aviation plunged over 6 per cent, the worst performer on the Nifty. Engineering giant Larsen & Toubro declined more than 5 per cent, given its exposure to West Asia. Index heavyweight Reliance Industries fell 2.6 per cent, dragging the Sensex down by 206 points.

 

“As India imports more than 80 per cent of its crude requirements, it is highly sensitive to West Asia instability. A sharp rise in crude prices raises input costs, widens the current account deficit, and feeds inflation. Equity markets tend to react swiftly, particularly in oil-sensitive sectors such as aviation, paint, cement, and chemicals,” Axis Mutual Fund said in a note.

 

All Nifty sectoral indices ended in the red, except for metals and pharma. The India Vix surged 25 per cent to 17.1 — its highest level in nine months — underscoring heightened trader anxiety. Market breadth was weak, with 754 stocks advancing against 3,641 declining on the BSE. The broader midcap and smallcap indices declined 1.6 per cent and 1.8 per cent, respectively.

 

Upstream oil producers gained on expectations of improved realisations from higher crude prices, while defence stocks bucked the broader weakness amid optimism that rising geopolitical tensions could spur higher defence spending.