Stock market crash: The Indian stock market witnessed a strong selloff in morning trade on Monday, March 2, as escalating tensions in West Asia, or the Middle East, dealt a blow to already cautious market sentiment amid foreign capital outflows, geopolitical uncertainties, and unimpressive earnings.
Why is the stock market falling? 5 key factors explained
Let’s take a look at 5 key factors behind the stock market crash today:
1. US-Iran war jitters
The market is fearing that the US-Iran war may escalate further and will spread to other parts of the region. Iran has strongly retaliated, launching missiles across the region after Iranian Supreme Leader Ayatollah Ali Khamenei and other senior officials were killed in attacks by the US and Israel.
Meanwhile, US President warned that the US will “avenge” the deaths of three US service members who were killed in Iran’s missile attack.
“America will avenge their deaths and deliver the most punishing blow to the terrorists who have waged war against, basically, civilisation,” Trump said in a video statement to Truth Social.
The conflict in West Asia began on 28 February when Israel and the US launched a joint attack on Iran.
“The medium-term impact on the market will depend on how long the conflict lasts. We don’t know the answer to this question. After crippling Iran, the US and Israel may make a strategic withdrawal,” V K Vijayakumar, Chief Investment Strategist, Geojit Investment, noted.
2. Crude jumps to multi-month high
have jumped sharply to multi-month highs amid escalating tensions in West Asia. Reports suggest tanker damages and security risks near the Strait of Hormuz, disrupting shipments.
Crude futures surged more than 8% on Monday. Brent crude surged above $82 before easing near $78, while West Texas Intermediate climbed to $75 a barrel. In over-the-counter trade on Sunday, Brent crude jumped 10% to about $80 a barrel.
A sharp jump in crude prices is a serious negative for the Indian economy and stock market sentiment, as it can widen India’s current account deficit, weaken the Indian rupee, raise inflation, and accelerate foreign capital outflows.
According to economists, a $10-per-barrel rise in crude oil prices may increase the import bill by roughly ₹10,000- ₹15,000 crore annually.
“Crude has spiked, and if the crude price remains high for an extended period of time, our balance of trade and balance of payments will be impacted since we import around 85% of our oil requirements,” Vijayakumar noted.
“OPEC Plus will scale up production and try to stabilise prices. If the is closed, the crude price can spike further. Trump may forcefully reopen this. But that requires boots on the ground, which will escalate tensions further,” Vijayakumar added.
(This is a developing story. Please check back for fresh updates.)
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