Sensex, Nifty tumble on US-Israel-Iran war; rupee hits record low, oil up

Indian stock market crashed on Wednesday as US-Iran war escalated. Sensex, Nifty fall over 2 per cent amid oil surge, FII selling, rupee at record low and inflation concern

Stock market crash on US-Iran war: Indian stock market bled on Wednesday, March 4, as tensions in West Asia saw no signs on abating. The war between US-Israel against Iran entered its fifth day today, with both the sides accelerating their military actions.

 

The BSE Sensex index plummeted 1,745.59 points (2.17 per cent) to hit a low of 78,486.51, while the Nifty50 slipped 531 points (2.13 per cent) to a low of 24,334.85.

 

In the broader markets, the Nifty MidCap index, and the Nifty SmallCap index declined 1.5 per cent each.

 

According to VK Vijayakumar, chief investment strategist at Geojit Investments Limited, the markets are going through a period of heightened uncertainty with the extent of the war’s havoc unknown.

 

 

“India relies on imports for around 85 per cent of its oil requirements. Thus, the real concern is the potential inflation and its consequences on economic growth. The impact of potentially widening trade deficit, depreciating currency, higher inflation and perhaps lower growth is the real issue for the markets. If this fear materialises, corporate earnings will be impacted,” he said.  CHECK Stock Market LIVE Updates 

Why is market falling today? Key reasons for Sensex, Nifty fall today, March 4:

 

US-Israel-Iran war enters Day 5

Equity markets crumbled on Wednesday as the war between US-Israel and Iran entered its fifth day on March 4. 

 

On Day 4, Israel launched airstrikes against Iranian missile launchers and a nuclear research site, while Iran targetted US embassies in Gulf region and disrupted energy supplies.

 

With both sides choosing military actions over diplomacy and dialogue, US President Donald Trump predicted that the war would last four to five weeks.

 

Global markets crash; Kospi plunges 10%

Asian markets witnessed a bloodbath on Wednesday as investors feared a prolonged war in West Asia. 

 

South Korea’s Kospi was the top laggard in the region, plunging 9.8 per cent Wednesday. The index hit a day’s low of 5,218.67 (versus previous close of 5,791.91) and was on track for its worst day since August 2024 amid an escalating war between Iran-Israel-US.

 

Reports suggest the Exchange temporarily halted trading for the Kospi index. A circuit breaker was also activated on the Kosdaq, which also fell by over 8 per cent.

 

That apart, Japan’s Nikkei 225 shed 3.89 per cent, while the Topix declined more than 4 per cent. Australia’s S&P/ASX 200 fell 1.81 per cent, Hong Kong Hang Seng index declined nearly 2 per cent, and mainland China’s CSI 300 fell 1 per cent.

 

Oil prices zoom

Oil prices continued their upward march on Wednesday with Brent crude futures rising 0.6 per cent today to $81.86 per barrel. US WTI, meanwhile, was up 0.28 per cent at $74.77/barrel.

 

Benchmark Brent crude oil futures are up more than 12 per cent for the week at $81.40 a barrel as the West Asian war damaged energy infrastructure in the Gulf region.

 

Iran has closed the Strait of Hormuz, which supports 30 per cent of global seaborne crude trade. 

 

In response, US President Donald Trump ordered an insurance guarantee on Gulf shipping and said the navy may escort oil tankers through the Strait of Hormuz, if necessary.

 

Fiscal concerns amid rising oil prices

 

Rising oil prices pose a risk to the Indian economy, which is heavily dependent on crude oil imports. A surge in oil prices would inflate the import bill for the country, leading to higher current account deficit. That apart, prolonged increase in oil prices may also increase inflation. 

Data indicate that a 10 per cent rise in crude prices could raise the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) by 40 to 80 basis points, while widening the current account deficit by approximately 30 basis points.

 

“Prolonged tensions among the United States, Israel, and Iran are mounting pressure on India across its current account, inflation outlook, and currency stability. Elevated crude prices stand to raise the country's import bill, widen its current account deficit, weaken the rupee, stoke inflation, and trigger foreign capital outflows,” said Devarsh Vakil, Head of Prime Research at HDFC Securities.

 

Notably, India consumes 5.6 million barrels per day (bpd) of crude oil, out of which around 40 per cent comes through Strait of Hormuz.

 

That said, the Government has assured that India remains well-stocked with inventories of crude oil and key petroleum products, including petrol, diesel, and aviation turbine fuel (ATF).

 

India currently holds 25 days of crude oil stock and 25 days of petroleum products inventory, including petrol and diesel, according to a Business Standard report. The country also holds liquefied petroleum gas (LPG) stocks of approximately 25-30 days.

 

FII selling, Rupee weakness

Foreign investors have resumed their selling of Indian stocks as higher crude oil prices triggered fiscal concerns for India. Rupee, too, has edged lower amid geopolitical worries, denting dollar-denominated returns for foreign investors.

 

Indian rupee opened at record low level of 92.05 per US dollar, falling 55 paise.

 

On Monday, FIIs sold equities worth ₹3,295.64 crore in the cash market, extending their selling spree into a third straight session. FIIs sold Indian stocks worth ₹7,536.36 crore on February 27, and ₹3,465.99 crore on February 26. 

 

Technical levels to watch

Technical analysts say the market is trading significantly below both short-term and medium-term averages, indicating a largely negative outlook.

 

“For positional traders, 24,600 on the Nifty index would act as a crucial support zone. If the market slips below this level, the correction could continue until 24,300. Further downside may also persist, potentially dragging the index to 24,000,” said Shrikant Chouhan, Head Equity Research, Kotak Securities.