How Will Markets React On Monday As Israel, US Attack Iran

The Indian stock market is expected to open lower on Monday after Israel and the United States attacked Iran on Saturday. Experts believe the market volatility index may spike, while foreign institutional investors could pull out funds.

While the broader markets may turn negative, defence stocks could gain. Aviation stocks may take a hit as airspace closes and flights are either diverted or cancelled.

Moreover, spot crude prices may spike, and investors may try to hedge losses through precious metals like gold and silver.

Though Israel has termed the missile attacks on Iran as pre-emptive strikes, it has reportedly targeted the office of Iran’s Supreme Leader, Ayatollah Ali Khamenei. In response, the Shia Islamist regime has retaliated with missiles towards Israel.

The involvement of the United States has raised concerns about the conflict expanding into a full-blown war. While the short-term impact on the market is likely to be negative, the mid- and long-term implications will depend on the extent of the crisis.

There could be significant implications for crude transportation and global trade if the conflict escalates. About 20 percent of the world’s crude oil is shipped through the Strait of Hormuz, which is believed to be in the conflict zone.

According to a report by Oilprice.com, a sharp “war premium” could be factored into crude oil prices when markets open. On Friday, crude prices had already jumped over 2 percent. WTI crude ended Friday’s trade at $67.02 per barrel, while Brent rose to $72.87 per barrel.

India depends on imports to meet over 80 percent of its oil demand. If the crisis persists, the government’s fiscal calculations could be affected.

According to the Petroleum Planning & Analysis Cell, India imported crude oil worth $133.36 billion in FY24, which increased to $137.17 billion in FY25. In the first 10 months of the current financial year, the country has imported crude oil worth $100.36 billion.

An increase in the import bill could also weaken the rupee against the dollar.

According to the International Energy Agency (IEA), India will contribute over 40 percent of the global increase in oil demand and about 8 percent of the growth in natural gas demand between 2024 and 2035.