Indian Markets Tumble as Oil Surge, Geopolitical Fears Trigger Broad Sell-Off

India’s benchmark equity indices witnessed a sharp decline on Thursday as escalating geopolitical tensions between the United States and Iran rattled global financial markets and pushed crude oil prices higher, triggering widespread selling across sectors. Snapping a three-day winning streak, the BSE Sensex plunged 1,236 points to close at 82,498 , while the NSE Nifty 50 dropped 365 points to settle near 25,454 , reflecting heightened risk aversion among investors.

Market sentiment turned fragile after concerns grew over potential disruptions in the Strait of Hormuz , a critical maritime route that handles nearly one-fifth of the world’s oil supply. The geopolitical risk premium drove Brent crude to multi-month highs above $71 per barrel , intensifying fears of imported inflation for India, which relies on imports for over 85% of its crude oil requirements . Rising energy prices threaten to widen the fiscal deficit, weaken the rupee, and squeeze corporate margins, prompting investors to reduce exposure to equities.

The sell-off was broad-based, with heavyweights such as Reliance Industries , Kotak Mahindra Bank , Mahindra & Mahindra , UltraTech Cement , Adani Ports , Tech Mahindra , ITC , and PowerGrid among the major laggards. Banking, infrastructure, and industrial stocks bore the brunt of the decline amid concerns that inflationary pressures and elevated input costs could slow economic momentum. Aviation and logistics stocks also faced pressure due to the direct impact of fuel price volatility.

Analysts noted that markets reacted more to the risk of escalation than to any immediate supply disruption. Iran’s demonstrated ability to influence shipping lanes and ongoing military posturing in the region have heightened uncertainty, while stalled diplomatic negotiations have further unsettled investors. Even without actual disruption, fears surrounding energy security are enough to trigger volatility in global markets.

Additional macroeconomic factors compounded the decline. Uncertainty surrounding the US Federal Reserve’s interest-rate trajectory , continued weakness in the Indian rupee , and profit-booking after recent gains added to the downward pressure. Market liquidity was also thinner due to the Lunar New Year holidays across key Asian markets and a regional banking holiday that led to a non-settlement trading session, amplifying volatility.

Despite the sharp fall, institutional activity provided some cushion. Foreign Institutional Investors (FIIs) remained net buyers, purchasing equities worth over ₹1,100 crore, while Domestic Institutional Investors (DIIs) added further support with net purchases exceeding ₹440 crore. However, reduced participation from overseas markets limited the stabilising impact.

Global cues remained mixed. While South Korea’s Kospi and Japan’s Nikkei ended higher and US equities closed in positive territory overnight, European markets traded lower amid rising geopolitical uncertainty. Analysts emphasise that the current correction is driven primarily by external factors rather than domestic economic weakness.

Looking ahead, market direction will hinge on geopolitical developments in West Asia, movements in crude oil prices, currency stability, and clarity on global monetary policy. A further escalation could push oil prices higher and intensify volatility, while diplomatic easing may stabilise energy markets and restore investor confidence.

For now, the sharp decline underscores how interconnected global geopolitics, energy security, and financial markets have become. While India’s economic fundamentals remain resilient, external shocks particularly those affecting oil supply and inflation expectations continue to exert powerful influence over market sentiment and short-term equity movements.