When the US and Israel began bombing Iran on 28 February, the market reaction was initially muted. For at least a couple of days, crude oil prices rose but not significantly. It appeared the market’s reading of the latest conflict in West Asia was similar to that of previous ones—disruptive but likely to be resolved soon.
But as it became clearer that Iran was not going to cave in, and as the threat to shipping through the Strait of Hormuz—which moves 20% of the world’s oil supplies—became apparent, crude oil skyrocketed past $100 per barrel before settling nervously below it. Global stocks tumbled, suggesting this could be a bigger flashpoint than previous oil shock events since 1990.
Mint explores the impact of the Iran war in the context of similar disruptions in the past.
Crude shock
Compared with the four previous ‘oil shocks’ since 1990, this latest conflict stands out in terms of how prices of key assets and commodities have moved. Before this, there was the first Iraq war of 1991, the US-led invasion of Iraq in 2003, the Russia-Ukraine war, and the so-called 12-day war between Iran and Israel last year.
Calculations show that the surge in Brent crude prices for about the first week of the current conflict was much sharper than in previous oil shocks. Within nine days of the initial strikes, oil prices were up 39%. The next steepest rise over a similar time frame was 22%, when Russia attacked Ukraine in February 2022. For the analysis, the price of oil is set at 100 on the date the event started (for example, 24 February 2022 in the case of Russia’s invasion of Ukraine) and all other values are rebased to it, up to 90 days before and after that event.
Mixed reactions
The 2003 invasion of Iraq had been heavily telegraphed by the West for months, reducing the shock element. Hence, oil prices remained flat and even declined once the invasion started. Similarly, in previous conflicts since 1990, stock markets barely moved in their immediate aftermath.
Since 1990, the Indian market’s reaction to has been mixed. In the 1991 Gulf War, the trigger for which was Iraq’s invasion of Kuwait, the Indian stock market behaved as though the conflict barely existed. During the first 90 days of that war, the BSE Sensex’s highest point was a gain of 42%. This was ironic, as the crude oil shock of that first Gulf War dramatically increased the cost of India’s oil imports and sowed the seeds of its 1991 balance-of-payments crisis.
The situation today is quite different. Just nine days of conflict have roiled stock markets around the world, and India’s is no exception. Since 28 February, the benchmark BSE Sensex has dropped around 5%.
Is this time different?
The Indian market’s reaction to the 1991 crisis was in contrast to that of global markets, which trended sharply downwards. This was depicted by movements in the MSCI World Index, which comprises large- and mid-cap stocks across the world’s major developed economies and is a barometer of global equity sentiment.
This changed during the 2023 Iraq invasion and the Russia-Ukraine war in 2022, with the MSCI World Index barely moving. One interesting theory is that global markets have developed a false sense of security following numerous invasions across West Asia by the US and its allies over the past few decades. have long believed that the flow of oil will not be disrupted, given its critical nature.
But the current conflict has punctured that theory, at least so far, with the closure of the Strait of Hormuz, which has made markets nervous about such an eventuality for the first time in decades. The MSCI World Index dropped 4% in the first nine trading days of the conflict.
Taking stock
It is sobering to note that both sides (US-Israel and Iran) have, so far, largely refrained from hitting key oil infrastructure across West Asia. For instance, Iran’s key oil transport hub on Kharg Island, where almost all its oil for export is loaded, has not been attacked yet. But it is anyone’s guess whether it will remain untouched.
What about the market’s view of oil and gas companies? The two key oil-shock events of the past five years show contrasting movements. In the case of the Russia-Ukraine war, stocks of oil and gas companies, as represented by the Nifty Oil and Gas Index, rose about 10% over the three months following the start of hostilities. Indeed, the past two years have been bumper years for oil and gas companies and oil traders. In the case of the Iran-Israel war of 2025, though, the index trended downwards.
This time around, the throttling of crude and supplies suggests oil and gas stocks are more likely to trend lower than higher.
Golden refuge
Gold is a key safe haven during times of global crisis. This time around, the movement in gold prices has been relatively muted. That could be because prices had already skyrocketed months before the war broke out. A range of factors, most notably investors and central banks seeking a safer alternative for the US dollar, had fueled the surge.
During past crises, gold prices surged sharply. The sharpest run-up was during the 1991 oil shock. If the ongoing war continues for many more weeks, as numerous observers predict, it’s likely that gold could see another major surge as there aren’t many other safe-haven assets investors can turn to.
The oil shock from the current crisis, if it continues for long, could very well deliver the biggest hit to global markets in decades. US President Donald Trump has said the war could end “very soon”, but the initial days of escalation have already shown the extent of damage it could unleash on the world.