Sensex, Nifty Tumble As Iran War Pushes Oil Toward $120; Investors Lose ₹25 Lakh Crore

India's stock market witnessed a sharp fall as rising tensions linked to the Iran conflict triggered panic among investors. The escalating geopolitical situation pushed crude oil prices higher and caused heavy selling across Indian equities.

As a result, more than ₹25 lakh crore in investor wealth has been wiped out since the crisis began.

Both major benchmark indices-Sensex and Nifty 50-fell steeply, marking one of the worst market declines in the past six years. Analysts say the surge in oil prices and foreign investor withdrawals are the main reasons behind the ongoing market pressure.

Sharp Decline in Sensex and Nifty

The S&P BSE Sensex, which tracks 30 major companies, dropped by as much as 3.16% or 2,494 points, touching 76,424.55 during intraday trading. At the same time, the NSE Nifty 50 index slipped 3.07%, hitting an intraday low of 23,697.80.

Although there was a slight recovery later in the day, market sentiment remained weak. The decline reflects growing investor concerns about the economic impact of rising global tensions and soaring energy prices.

Experts say the biggest trigger behind the sell-off is the sudden surge in crude oil prices. Oil prices are now testing the $120 per barrel level, which could significantly affect India's economy.

Why Rising Oil Prices Are Worrying for India

India imports a large portion of its crude oil needs. Because of this, any major increase in oil prices directly impacts the country's economy.

According to analysts, every $10 rise in crude oil increases India's current account deficit by around 40 basis points.

A basis point is equal to one-hundredth of a percentage point, and even small changes can have large economic effects.

Higher oil prices increase import costs, weaken the rupee, and raise inflation. These factors often create pressure on stock markets.

A Week of Heavy Market Losses

The recent trading sessions show how quickly the market sentiment turned negative.
March 2 (Monday): The Nifty 50 opened sharply lower, falling 685 points (2.68%) to close at 24,865.

March 4 (Wednesday): Selling pressure intensified, dragging the index down another 560 points to 24,305, marking its lowest close since mid-2024.

March 5 (Thursday): Markets briefly recovered with a 461-point rise, ending at 24,766.

March 6 (Friday): The recovery did not last long as the index slipped again to 24,450.

The week was also shortened due to the Holi holiday on March 3, leaving little time for markets to stabilise.

Foreign Investors Pull Out Massive Funds

One of the biggest reasons behind the sharp fall has been the large withdrawal of foreign investment.

Foreign institutional investors (FIIs) sold nearly ₹21,000 crore worth of Indian equities between March 2 and March 6.
As a result, the total market value of all BSE-listed companies dropped from about ₹463.9 lakh crore to below ₹440 lakh crore. With continued selling on Monday, the overall loss in market value has now crossed ₹25 lakh crore.

Such heavy outflows usually create strong downward pressure on stock prices.

Major Sectors Facing Pressure

The decline in the market has affected many sectors, but some industries have been hit harder than others.

Aviation Sector

Airline stocks suffered due to rising fuel costs. Shares of InterGlobe Aviation, which operates the airline IndiGo, have dropped over 7% as higher jet fuel prices threaten profitability.

Banking Sector

Bank stocks also declined as investors fear that the Reserve Bank of India (RBI) may delay interest rate cuts. Higher inflation caused by expensive oil could force the central bank to maintain tighter monetary policy.

Consumer Stocks

Consumer discretionary companies, which rely on strong consumer spending, also came under pressure due to fears of slowing economic growth.

Some Companies Show Resilience

While most sectors struggled, a few companies managed to remain relatively stable.
Energy and commodity-related firms such as Coal India and Reliance Industries performed better compared to the broader market. Investors often move towards such stocks when energy prices rise because these companies may benefit from higher commodity prices.
Analysts Warn of More Volatility

Market experts believe the situation could become more challenging if oil prices continue to rise.
If crude prices remain close to $120 per barrel, India's fiscal deficit could widen by 30-40 basis points beyond government projections. This might force the government to either reduce infrastructure spending or increase fuel subsidies-both of which could affect economic growth.

At the same time, the RBI may face a difficult situation where inflation rises while economic growth slows, a scenario known as stagflation.

Domestic Investors Provide Some Support

Despite heavy foreign selling, domestic institutional investors (DIIs) have stepped in to buy stocks and reduce the intensity of the market fall.
Their buying has helped prevent a more severe crash. However, analysts say market stability will depend largely on how the geopolitical situation and oil prices evolve in the coming weeks.

Some market strategists have already lowered their year-end targets for the Nifty, with projections going as low as 22,500 if the conflict continues for a long time.