Sensex, Nifty Slip As Trump's Iran Escalation Pushes Oil Above $85

Benchmark equity indices Sensex and Nifty traded lower on Tuesday as escalating tensions in West Asia pushed crude oil prices to a four-week high, raising concerns over inflation, India's import bill and foreign fund flows.

At around 9:30 a.m., the BSE Sensex was down 330.62 points, or 0.43%, at 77,285.78 after opening lower at 77,272.34. The NSE Nifty also traded in the red as investors remained cautious amid geopolitical uncertainty and weak global cues.

Fresh U.S.-Iran Escalation Weighs On Sentiment

Investor sentiment turned cautious after the U.S. military carried out a third consecutive night of strikes against Iran. President Donald Trump also announced the reinstatement of a blockade on Iranian shipping and proposed charging a 20% fee to secure commercial movement through the Strait of Hormuz.

"We're hitting them very hard. And it'll continue, and we'll see what happens," Trump told reporters in the Oval Office. "We're knocking out all of their offensive capability and we're controlling the straits. We're putting the blockade back," he said.

The renewed military action heightened concerns over energy supplies through the Strait of Hormuz, a key global oil transit route.

Crude Oil Climbs Above $85

Crude oil prices extended their rally, with Brent crude futures rising $1.68, or 2%, to $84.98 a barrel, while US West Texas Intermediate (WTI) crude gained $1.65, or 2.1%, to $79.79 a barrel.

Brent briefly crossed the $85-per-barrel mark, its highest level since the U.S. and Iran signed a memorandum of understanding on June 17 aimed at ending the conflict. The benchmark had already surged 9.6% in the previous session, marking its biggest single-day gain since May 2020, according to Reuters.

Higher crude prices are a concern for India, the world's third-largest oil importer, as they can widen the current account deficit, increase inflationary pressures and weigh on corporate earnings.

Market volatility also increased, with India VIX rising around 3% to nearly 14, reflecting heightened investor nervousness.

The Indian rupee weakened past the 96-per-US dollar mark for the first time since late May, falling around 0.46% as elevated crude oil prices and sustained demand for the greenback weighed on the domestic currency.

Analyst Sees Rising Headwinds

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the renewed escalation in the U.S.-Iran conflict and Brent crude rising to around $84 could again begin to hurt India's macroeconomic fundamentals if the rally in oil prices persists.

He also highlighted the rise in the U.S. 10-year Treasury yield to 4.61% and higher domestic inflation as additional concerns that could affect foreign portfolio investment flows.

According to Vijayakumar, investors should remain cautious until there is greater clarity on geopolitical developments and the trajectory of crude oil prices. He added that the recent rebound in IT stocks, supported by attractive valuations and better-than-expected quarterly results from TCS and HCLTech, appears to be a short-term tactical trade rather than a structural recovery.