Iran-Israel conflict: Should stock market investors be worried?

With rising tensions in the Middle East, should stock market investors brace for impact? Read on to know what it means for Dalal Street.

In Short

• Middle East tensions push oil prices, raise inflation concerns
• Sensex drops 1,250 points amid geopolitical and market uncertainty
• Market volatility expected as Middle East tensions continue escalating

As tensions flare in the Middle East, the Sensex has taken a sharp hit, dropping over 1,250 points in early trade. Naturally, retail investors are left wondering: is this the time to worry?

At around 11:30 am, the Sensex was down 1,251.97 points to 83,014.32 points, and the combined market capitalisation of BSE-listed companies declined by Rs 6 lakh crore.

On the other hand, the NSE Nifty50 tanked 379.60 points to trade at 25,417.30.

Should investors be worried?

While the direct effects on global markets are still unfolding, one key concern is the surge in oil prices.

Iran’s missile strikes on Israel have raised fears of potential disruptions to oil supplies, pushing Brent crude above $75 per barrel, while West Texas Intermediate has hit $72.

For an oil-importing nation like India, this spike could translate into increased inflationary pressures.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “If Israel targets oil installations in Iran, we could see a huge spike in crude prices. This will be particularly damaging for oil importers like India.”

Rising crude prices typically inflate costs for businesses, increase transport expenses, and potentially weaken corporate earnings—all of which can negatively affect the stock market.

What should investors do?

Market experts suggest a more cautious approach during this period of uncertainty.

Vijayakumar advises diversifying portfolios to defensive sectors like pharmaceuticals and FMCG, which tend to be less volatile during geopolitical crises.

Adding to the cautionary tone, Dr. Manoranajan Sharma, Chief Economist at Infomerics Ratings, offered deeper insights into the broader implications of the conflict.

He noted, “Iran’s missile strikes, and the potential for Israeli retaliation, mark another major flashpoint in the Middle East war scenario. With the US firmly backing Israel, we could see a sharp escalation. Investors should brace for volatility, as these geopolitical tensions are likely to persist.”

In times like these, while the market reacts swiftly to news, long-term investors may benefit from holding their nerve and seeking safer sectors, but experts strongly believe that it is essential to stay informed on how the geopolitical landscape evolves.

Santosh Meena, Head of Research, Swastika Investmart, said, "For long-term investors, this correction offers a good buying opportunity in large-cap stocks, where valuations have become more attractive. We are observing sectoral rotation, with commodity-related stocks expected to perform well in the near term."

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)