Last week, the Sensex and Nifty ended at their lowest since April 2025, stretching their losses to 8-9% since the war began two weeks ago. Although equities appear oversold after their recent rout, oil prices above $100 a barrel are making investors reluctant to deploy cash in a hurry.
With Trump theoretically expanding the scope of attacks by threatening further strikes on Iran’s Kharg Island – home to the country’s oil exports infrastructure – the market is resigning itself to the fact that the conflict between US-Israel and Iran may not end soon. Tehran has pledged to respond even as Washington has urged the UK to send battleships to the region to force open the Strait of Hormuz.
“It is not the fog of war, but a fog of words that has led to elevated uncertainty around how this war will play out,” said Barclays’ economists, including Christian Keller, in a client note over the weekend. “In turn, this has led to violent swings in the price of oil and financial assets.”
Crude Risks
The rupee, meanwhile, has slid 1.6% since the start of the war despite central bank interventions, and the currency closed at a record low of 92.48 to the dollar on Friday.
Market participants expect the rupee – the worst performing Asian monetary unit in 2025 and on track to feature in the lower half of the leader board this quarter as well – to drift lower if crude oil prices leap past $100 a barrel.
“The risk of crude is going to stay high, and the outlook for the rupee remains cautious as it could create macroeconomic challenges for the Indian economy,” said Jateen Trivedi, VP research analyst, currency, at LKP Securities. “In the near term, the rupee is expected to trade within a range of 91.90-92.80, with crude price movements and dollar index trends remaining the key drivers.”
A Reuters report said Goldman Sachs expects Brent crude to trend above $100 in March and around $85 in April, before a gradual easing in supplies – unless the war is protracted – helps the gauge to settle at low 70s to the dollar later in the year. Brent oil surged to a touching distance of $120 a barrel last Monday, a level not seen since the immediate aftermath of the Ukraine invasion by Russia.
The surge in crude oil prices and the resultant slide in the rupee have kept investors on the sidelines, especially amid expectations the central bank interventions might do little to stem the rupee’s rout. Foreign portfolio investors (FPIs) have continued to pare holdings in Indian equities through March. On March 13, they sold shares worth ₹10,716 crore.
