Markets sink again, volatility surges on crude spike and growth worries

Indian markets fell to 10-month lows as crude oil surged on West Asia tensions, stoking fears of higher inflation, a wider current account deficit, and pressure on corporate earnings

Indian equity markets slumped to their lowest levels in about 10 months on Monday after a sharp spike in crude oil prices rattled investors, stoking fears that a fresh bout of higher inflation could erode corporate earnings and slow economic growth.

 

The Sensex fell as much as 3.2 per cent in intraday trade to a low of 76,425 before staging a partial recovery to close at 77,566, down 1,353 points or 1.7 per cent — its weakest finish since April 2025. The Nifty 50 ended at 24,028, down 422 points or 1.7 per cent, marking its lowest close since May 2025.

 

 

Monday’s slide was the steepest for both benchmark indices since the presentation of FY27 Union Budget on February 1. Since the outbreak of hostilities in West Asia, the indices have shed roughly 4.6 per cent.

 

Global markets reflected similar unease. Wall Street opened lower on Monday as investors braced for the inflationary shock from surging oil prices.

 

European and Asian equities also traded weak, while gold slipped more than 1 per cent, pressured by a strengthening dollar.

 

The total market capitalisation of BSE-listed companies declined by ₹8.5 trillion to ₹441 trillion.

 

Foreign portfolio investors (FPIs) were net sellers of equities worth ₹6,346 crore, while domestic institutional investors (DIIs) were net buyers of ₹9,014 crore. The India VIX, a gauge of market volatility, climbed to 23.36, its highest level since June 2024.

 

Crude oil prices surged as much as 26 per cent intraday, touching $116.8 a barrel, after major producers cut supplies and fears mounted over shipping disruptions as the US-Israel confrontation with Iran intensified. The Strait of Hormuz, through which nearly a fifth of the world’s oil supply flows, has effectively been shut. 

 

Investors were further unsettled by the appointment of Mojtaba Khamenei as Iran’s supreme leader, a development widely interpreted as signalling that Tehran’s leadership is unlikely to retreat quickly from its confrontation with Washington and Tel Aviv.

 

For India, heavily dependent on imported oil, the surge in crude prices carries particular risks. Higher oil costs typically fuel inflation, widen the current account deficit and weigh on economic growth. The Indian rupee also came under pressure, weakening sharply to touch a fresh low of 92.3 against the US dollar.

 

The flare-up in geopolitical tensions comes at a moment when Indian equities are already contending with concerns over global growth and structural disruptions from artificial intelligence.

 

“Unlike the Russia-Ukraine war, this is not a skirmish between two countries. Half a dozen other countries have been bombed and (the closure of) the Strait of Hormuz has dramatically affected oil prices. Moreover, the US is directly involved in this conflict, and it does not appear that the parties will come to the negotiating table anytime soon,” said U R Bhat, co-founder of Alphaniti Fintech.

 

Bhat warned that persistently high oil prices would pose a serious challenge for the Indian economy. “If oil prices rise further, even discounted Russian crude will not fully cushion the impact. It will widen the current account deficit. Exports could also be hit because of disruptions to shipping routes. So India could face a double whammy of rising imports and weaker exports,” he said.

 

Market participants said the near-term trajectory of equities would hinge largely on how the conflict in West Asia unfolds. “The next immediate support for the Nifty 50 is placed around 23,500, followed by the 23,200 zone. On the upside, any recovery towards the 24,000-24,300 band is likely to face stiff resistance. Considering the prevailing uncertainty and the scheduled weekly expiry, we maintain a cautious stance and recommend strict risk management until stability returns,” said Ajit Mishra, SVP–Research at Religare Broking.