Benchmark Brent crude prices, which had surged sharply at the onset of the crisis, eased after market sentiment improved on expectations of de-escalation pertaining to West Asia conflict.
US President Donald Trump has stated that war would come to an end “very soon”.
Traders responded positively to reports suggesting that the conflict may not intensify further in the immediate term. Additional reassurance came from signals by G7 nations expressing readiness to release strategic petroleum reserves if supply shortages arise.
The move is seen as a buffer against sudden disruptions and speculative spikes.
Oil prices surged towards $120 per barrel yesterday, compared to a price of $70 per barrel in late February.
This was because the conflict shut down the Strait of Hormuz, a critical route carrying 20 per cent of the world’s oil exports, as Iran attacked oil vessels, creating a fear of a potential shortage of oil supplies, thereby creating a price increase of $49 per barrel. Saudi Arabia also cut oil supplies, thereby increasing Brent crude prices by 35% in a week, the largest increase since 1983. However, today, oil prices are declining as talks of peace are underway, Sanket Roge, Research Analyst at Bonanza, said.
Stock market impact
that have been rattled since the conflict began.
The emergency call between Trump and Putin of Russia to share some quick solutions for peace also helped to reduce tensions in the market, Bonanza analyst empahsised.
Energy-import dependent economies, particularly India, remain sensitive to oil volatility. India imports nearly 85 per cent of its crude requirements, making its economy vulnerable to external price shocks. The earlier spike in oil had raised concerns of a widening trade deficit, currency depreciation, higher inflation, and potential interest rate hikes — factors that could weigh on economic growth and corporate profitability.
Reflecting these worries, the benchmark Nifty 50 index has fallen sharply, sliding nearly 1,000 points since the war began as foreign and domestic investors reduced risk exposure, according to Dr. V K Vijayakumar. Chief Investment Strategist, Geojit Investments.
Sectoral imapct
However, Tuesday’s decline in crude prices helped limit further market losses and improved investor sentiment across several sectors, particularly oil marketing companies, aviation, and paint manufacturers that benefit from lower input costs.
In today’s trading session, OMC stocks BPCL, HPCL and IOC soared 3-6 per cent in today’s trade. Aviation stocks InterGlobe Aviation and SpiceJet zoomed 6-8 per cent. Asian Paints and Berger Paints gained 2-4 per cent.
Market experts believe the trajectory of crude prices will remain the key determinant of near-term equity performance.
“Historically, geopolitical conflicts have only a temporary impact on markets,” Vijayakumar said.
“If the conflict lingers and crude remains elevated, India’s macroeconomic fundamentals will come under pressure. However, if tensions ease within weeks, the economic impact will likely remain marginal.”
He added that India could still deliver healthy GDP and corporate earnings growth in FY27 under a stable oil price scenario, which would help markets rebound.
What should investors do?
“History shows that markets recover to pre-crisis levels within weeks or months of geopolitical shocks. Investors should not panic. Mutual fund SIP investors have earned healthy double-digit returns over the past five years. Remaining invested and continuing systematic investments is the ideal strategy. This is the time for patience — and patience will be rewarded,” Vijayakumar added.
Sanket Roge, Research Analyst at Bonanza, suggested investors may consider increasing exposure to export-oriented companies while trimming holdings in oil exploration firms. Allocating a portion of the portfolio to gold can also serve as a safeguard against potential geopolitical tensions involving Iran.
“India’s economic growth is very high in the long term but should be hedged by 10 to 20 per cent,” Roge added.
Analysts note that while volatility may persist in the short term, easing crude prices could act as a stabilising force for global equities if diplomatic efforts continue and supply fears remain contained.