Iran–Israel War Impact on Indian Stock Market

In the last few days, the relations between Israel and Iran have taken a new turn. On June 13, 2025, Israel carried out airstrikes on Iran’s oil and energy infrastructure, which created an atmosphere of concern around the world. Brent crude prices suddenly rose above $78 per barrel and the Indian rupee fell to ₹86 per USD. 

The direct impact of this growing uncertainty is visible on the Indian stock market. At such a time, it is very important for investors to understand which sectors may be affected the most to make informed investment decisions.

How This War Affects Indian Markets?

The impact of the Iran-Israel war on the Indian markets can be summarized in the following points:

• Rise in crude oil prices : The growing tension between Israel and Iran has threatened global oil supply. As a result, Brent crude prices instantly crossed the $78 per barrel, more than 10% rise between 12 June and 13 June 2025. It has increased by more than 20% since the beginning of June from $63 to $78 per barrel, which is sure to affect the various economic sectors and crude-importing nations as India.

• Pressure increased on rupee : The rupee weakened as oil became expensive, and recently fell to the level of around ₹86 against the dollar. RBI had to intervene to handle the situation, but the weakness of the rupee can make imports expensive even further.

• FII selling, DII buying : Amid global uncertainty, foreign investors i.e. FII has withdrawn more than ₹5,869 crores by 18 June. However, domestic institutional investors (DII) have tried to maintain stability in the market and bought ₹58,138 crores worth of securities.

What does this mean for investors?

• Expensive oil = More inflation as Increased costs for companies
• Weak rupee = IT and export sectors benefit, but adverse impact on FMCG and Auto
• FIIs withdrawal = more volatility in the market

Sector-Wise Impact

Let’s look at the sector wise impact of the Iran-Israel war in more detail:

• Oil & Gas Sector: Brent crude prices have reached around $78 per barrel, which has directly affected crude oil importing countries like India. Rising crude oil prices are increasing the cost of importing, while oil producing companies benefit from it.

• Defense & Aerospace: Global tensions are expected to increase defense spending in many countries, including India. Due to this, the market is keeping an eye on domestic companies in the defense sector.

• IT & Exporters: Rupee has weakened to around ₹86.4 against the dollar, due to which the profit margins of export companies are improving.

• Precious Metals & Gold : In times of instability, investors turn to traditionally safe instruments due to which there is a surge in prices of gold and silver.

• Auto & Consumer: Rising fuel prices have led to an increase in transportation costs, which has put pressure on profit margins of the automobile and FMCG sectors.

Stock Market Sentiment & FII Activity

Let’s analyze the stock market sentiment and the FII activity:

• Foreign and domestic investment trends : The surge in crude oil prices due to rising tensions in the Middle East are making foreign investors cautious. Foreign investors (FIIs) have started withdrawing from equities since early June, while domestic institutional investors (DIIs) have been actively buying, providing stability to the market.

• Currency and RBI’s role : The rupee has been showing continuous weakness, reaching around two-month lows, and the RBI has tried to stop the slide by infusing rupee liquidity through open market operations. This indicates the crucial role of RBI in controlling Indian currency when a geopolitical event causes volatility.

• Volatility scenario : India VIX remains around 14–15 levels, which indicates that the market is trying to hold ground, but uncertainty persists.

Global Economic Impact of the War 

The economic impact of the war on the global level can be understood as follows:

• Crude oil prices : The war between Iran and Israel has shocked the global energy market. Iran is one of the world’s largest oil producers, and 20% of global oil is transported through the Strait of Hormuz. As tensions in the region increased, concerns about disruption in crude oil supply rose and prices rose sharply. This has caused oil importing countries, such as India, to pay for expensive fuel.

• Impact on global inflation and commodity markets : Oil inflation directly increases the cost of transport, production and other commodities. At present, global inflation is already at a high level, and the war has made the scenario more severe. Volatility can be seen in the prices of other commodities as well such as metals.

• Fear among investors : Investors around the world shy away from risk in volatile times, especially if it is due to war. Global equity markets are under pressure due to cautious sentiment shifting of investor capital to safer investment options like gold, bonds, etc.

Tips for Investors 

During such times, the investors should avoid taking investment decisions emotionally and always remember the following points:

• Avoid panic, keep a clear stance : Even though volatility has increased in the market, it is not wise to exit a particular sector in a hurry or sell everything without analysing. Sometimes decisions taken out of fear can be harmful in the long term. At such times, it is important to stay calm and understand the bigger trends.

• Keep an eye on oil and dollar : Crude oil prices and the movement of the US dollar are the two biggest factors determining the direction of the Indian market at this time. Sharp price changes in these can have a direct impact on sector-wise performance – especially in industries like auto, IT, and manufacturing.

• Focus on strong companies : In such a situation, the focus should be on those companies whose fundamentals are strong and business model is stable. Such stocks are relatively less affected by market decline.

• Look at short-term volatility as a long-term opportunity : At a time when the market is under pressure, it can be an opportunity for long-term investors to buy some quality stocks at discounted prices due to panic selling.

Conclusion

The impact of the Iran–Israel war is not just confined to political boundaries; its direct impact was felt on the global economy and the Indian stock market as well. At such a time, it is not enough to just look at the index movement. Sector-wise analysis, understanding the fundamental position of individual companies and keeping an eye on global developments is important. Investors should remain alert and keep assessing their portfolios from time to time. It is advised to consult a financial advisor before making any investment decision.

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