Sensex tanks over 500 points as oil spike from US-Iran flare-up hits Dalal Street

New Delhi: Indian equities opened sharply lower on Wednesday as a fresh flare-up in the US-Iran conflict pushed crude oil prices higher and brought risk-off trade back to Dalal Street. The Sensex fell 537.83 points to 77,642.89 in early trade, while the Nifty declined 163.55 points to 24,235.15. The fall meant the Sensex was down about 0.7% from Tuesday’s close, while the Nifty slipped below the 24,250 mark. The decline came after US airstrikes on Iran and renewed sanctions on Iranian crude sales revived concerns over supply disruption through the Strait of Hormuz. Brent crude futures rose over 2% to around $76 a barrel, while WTI crude climbed to about $72 a barrel. Both benchmarks had already gained around 3% on Tuesday after the US withdrew the licence that had allowed sale of Iranian crude. For India, higher crude remains a direct market concern because it can widen the import bill, add pressure on the rupee, raise inflation worries and affect sectors linked to fuel and input costs. Selling spreads beyond frontline indices The early fall was not restricted to the Sensex and Nifty. Broader markets also slipped into the red, with the Nifty Midcap 100 and Nifty Smallcap 100 falling around 0.5% each in morning trade. Market breadth was weak, with more declining stocks than advancing shares on the NSE. Among Sensex stocks, UltraTech Cement, Asian Paints and IndiGo were among the leading losers, falling 2-3%. Maruti Suzuki, Bajaj Finance, ITC, Kotak Mahindra Bank, SBI, Bajaj Finserv, Tata Steel, Bharat Electronics and Reliance Industries also traded lower by nearly 1% each. Infosys, TCS and Sun Pharma were among the few Sensex stocks trading in the green with marginal gains. Pharma also held up better sectorally, with the Nifty Pharma index rising around 0.7% in early trade. The weak opening showed that the market was reacting first to the external shock rather than domestic support factors. Financials, auto, metal, oil and gas and PSU bank stocks saw selling pressure, while defensives and select IT names offered limited support. Crude, rupee and volatility in focus The main concern for investors was crude oil. Oil prices rose after US Central Command said its forces had launched strikes against Iran in response to attacks on commercial vessels passing through the Strait of Hormuz. The waterway remains one of the most important routes for global crude movement, and any fresh disturbance there quickly affects energy-importing economies such as India. The rupee also opened lower at 95.1725 against the US dollar, compared with the previous close of 94.9675. The currency had gained sharply in the previous session, supported by cheaper oil, improved global risk sentiment and FII buying, but the overnight rise in crude reversed part of that comfort. India VIX, the market’s volatility gauge, jumped more than 5% to 12.25 in morning trade. The rise was not extreme, but it showed that traders were pricing in more uncertainty after the geopolitical trigger. Foreign investors, however, had remained net buyers on Tuesday. FIIs bought Indian equities worth more than Rs 393 crore, marking the fifth consecutive session of foreign buying, according to provisional data cited by market reports. That makes Wednesday’s market move important. The fall was not caused by a domestic flow reversal at the start. It was triggered by a global risk event that pushed up oil and hit sentiment. Recent rally loses momentum The fall also came after domestic markets had already shown signs of fatigue. On Tuesday, the Nifty closed at 24,399 after snapping a four-session winning streak. Profit booking after the recent rally and weakness in realty and metal stocks had weighed on sentiment. Before Wednesday’s opening, GIFT Nifty was trading lower by 173 points, or 0.71%, at 24,210.50, indicating a weak start for Indian equities. Analysts had been watching whether the Nifty could hold above the 24,300 zone. A break below that level was expected to weaken near-term momentum, while sustained strength above 24,400 was needed for the index to regain upward direction. With the Nifty slipping to 24,235.15 in early trade, the market moved below that immediate support area. Traders will now watch whether the index recovers above 24,300 during the session or extends the decline towards lower support levels. What it means for investors The early sell-off is a reminder that Indian equities remain sensitive to crude and geopolitical risk even when domestic flows are supportive. If crude continues to rise, the pressure can move from oil-linked sentiment to inflation expectations, rupee movement and earnings assumptions for sectors such as aviation, paints, logistics, autos and consumer goods. Banks and financials also become important because they carry the largest weight in the indices. If financial stocks remain weak, it becomes difficult for the Nifty and Sensex to recover quickly even if defensives support the market. For now, the market is dealing with three moving parts: the scale of US-Iran escalation, the movement in crude oil and the rupee’s reaction. A recovery later in the day will depend on whether oil stabilises, whether global markets remain orderly and whether domestic buying returns around lower levels. Until then, Wednesday’s opening shows that the recent positive bias in Indian equities has run into a fresh external shock.