Crude Spike and West Asia Tensions Lift India VIX, But Upmove Remains Capped

The India VIX index, a barometer to gauge volatility in the market, surged as much as 6% to its day’s high of 14.52 on June 23 as US airstrikes on three nuclear sites in Iran sent shockwaves across global markets, pushing investors on edge.

Adding another layer of fear and uncertainty in the market has been concerns over disruptions of oil supply routes amid intensifying tensions in West Asia. At the centre of the turmoil is the Strait of Hormuz, the narrow maritime chokepoint through which nearly a fifth of the world’s crude oil and liquefied natural gas (LNG) passes.

Fears of a potential blockade, either through direct action by Iran or by Iran-backed militias targeting ocean freight carriers have added to the growing risk premium on oil, already rattled by recent US strikes on Iranian nuclear infrastructure and the possibility of a broader regional conflict. On the heels of that, Brent crude prices marched towards the $80 per barrel mark, sounding alarms of caution for a net importer like India.

While these persisting headwinds have pushed investors on the sidelines, tipping off a spike in India VIX, the ‘fear-gauge’ still remains below its previous highs seen on June 13, the day Iran attacked Israel.

On that day, the volatility index closed at 15.08, marking a sharp spike following Israeli allegations that Tehran was pursuing a nuclear weapons programme. However, since then, despite the steady escalation in regional hostilities and global oil prices, the index has remained subdued.

This is somewhat surprising, given that the India VIX has already navigated a trio of risk events this year including former US President Donald Trump’s retaliatory tariffs in April, India’s ‘Operation Sindoor’ in response to the Pahalgam terror attack, and now, the Iran-Israel conflict.

Despite these developments, year-to-date, the India VIX remains down by around 2%, signalling that investors are betting for a measured approach in the face of geopolitical risks. While there have been intermittent spikes, each surge has been followed by a swift cooldown, suggesting that market participants are pricing in temporary turbulence rather than a sustained shift in risk appetite.

Vinit Bolinjkar, Head of Research, Ventura Securities shared similar views, stating that while short-term volatility is likely to persist, long-term investors should remain focused on fundamentals and selectively explore value in the current correction.