Iran Israel Conflict : Impact on Indian Stock Market

Iran Israel Conflict: How It Impacts Nifty & Your Stocks

Option Matrix India | June 19, 2025, 12:40 PM IST

Geopolitical tensions in the Middle East have escalated significantly, with the conflict between Iran and Israel now entering its seventh day. With headlines of fresh strikes and rising casualties, traders and investors on Dalal Street are closely watching the situation. While Nifty is holding firm above the crucial 24,800 mark, underlying volatility is high. DII remains committed to supporting the Indian Stock Market.

This article breaks down the present and future impact of the conflict on the Indian stock market and identifies specific stocks that could be affected.

        graph LR
        A[Iran-Israel Conflict] --> B[Rising Oil Prices]
        A --> C[Higher Inflation]
        A --> D[Currency Depreciation]
        B --> E[RBI Rate Hike Fears]
        C --> F[Reduced Consumer Spending]
        D --> G[FPI Outflows]
        
        style A fill:#ff6b6b,stroke:#333,color:#fff
        style B fill:#ffd166,stroke:#333
        style C fill:#06d6a0,stroke:#333
        style D fill:#118ab2,stroke:#333,color:#fff
        style E fill:#ef476f,stroke:#333,color:#fff
        style F fill:#073b4c,stroke:#333,color:#fff
        style G fill:#7209b7,stroke:#333,color:#fff
    

The Immediate Impact: What's Happening Now?

The market's initial response to conflict is influenced by factors such as uncertainty, apprehension, and the dynamics of global capital flows.

• Spike in Volatility: The primary and most visible impact is a jump in market volatility. The India VIX, or fear index, tends to rise as traders become nervous about the outcome. Expect sharp, news-driven swings in the Nifty and Bank Nifty.
• Crude Oil on the Boil: This is the most critical factor for India. Brent Crude prices have surged and are hovering around $76-$77 per barrel. As India imports over 85% of its oil, higher prices lead to inflation, a higher import bill, and pressure on the Indian Rupee.
• Flight to Safety: During conflicts, global investors often sell assets in emerging markets like India and move their money to "safe havens" like Gold and the US Dollar. This can lead to FII (Foreign Institutional Investor) outflows.

Near-Future Outlook: What to Expect Next?

In the upcoming weeks, the market's trajectory will be significantly influenced by the unfolding events surrounding the conflict, as various factors come into play and shape investor sentiment.

• Headline-Driven Market: Be prepared for a market that reacts sharply to every piece of news. Any sign of de-escalation or negotiation could trigger a relief rally, while news of further escalation could cause steep falls.
• RBI & Government Watch: The Reserve Bank of India will be closely monitoring the situation. If oil prices remain high for a prolonged period, it could force the RBI to take a more hawkish stance on interest rates, which would be a negative for the market.
• Sectoral Rotation: Money will not leave the market entirely but will likely move from high-risk sectors to defensive ones. Traders must be quick to identify this shift.

Stocks in Focus: The Bullish & Bearish View

Certain sectors and stocks are directly impacted by this conflict. Here’s a quick guide:

Stocks with Bearish Impact 

These companies are hurt by rising crude oil prices and global uncertainty.

• Airlines: (e.g., IndiGo, SpiceJet) - Their biggest expense is Aviation Turbine Fuel (ATF), which is directly linked to crude oil. Higher oil prices crush their profit margins.
• Paint Companies: (e.g., Asian Paints, Berger Paints) - Crude oil derivatives are a key raw material for paints. Higher input costs mean lower profits unless they can pass the cost on to consumers.
• Tyre & Adhesives: (e.g., MRF, Apollo Tyres, Pidilite) - These sectors use crude-based inputs like synthetic rubber and other chemicals, leading to margin pressure.
• Auto Sector: (e.g., Maruti Suzuki, Tata Motors) - Sustained high fuel prices can dampen consumer sentiment and demand for new vehicles.

Stocks with Bullish Impact 

These companies can benefit from the current geopolitical climate.

• Defence Stocks: (e.g., HAL, Bharat Dynamics, Mazagon Dock) - Geopolitical tensions globally increase the focus on national security. This leads to expectations of higher defence spending by the government, creating a positive sentiment for these stocks.
• Oil & Gas Producers: (e.g., ONGC, Oil India) - As producers of crude oil and gas, their revenues and profits are directly linked to higher global energy prices. They are the most direct beneficiaries.
• IT Services: (e.g., TCS, Infosys, Wipro) - Often considered a "defensive" sector. Their earnings are in dollars and they are relatively insulated from domestic inflation and oil shocks. They can act as a safe place for investors to park their money during high volatility.
• Gold Loan Companies: (e.g., Muthoot Finance, Manappuram) - Gold prices rise during conflict due to its safe-haven appeal. This increases the value of the underlying asset for these loan companies.

The Big Picture: India's Long-Term Resilience

For long-term investors, it's important to look beyond the immediate noise. Historically, markets tend to recover quickly from geopolitical shocks as long as they don't lead to a full-blown global recession.

The fundamental India growth story—driven by strong domestic demand and government spending—remains intact. While the near future will be volatile and challenging for short-term traders, these periods of uncertainty often present opportunities for long-term investors to accumulate quality stocks at better prices.

Key Takeaway: Trade with caution. Keep a close watch on crude oil prices and news headlines. For investors, focus on the underlying strength of the Indian economy, which has weathered many such storms in the past.

Disclaimer: This article is for informational and educational purposes only and should not be considered investment advice. Trading in the stock market involves significant risk. Please consult your financial advisor before making any decisions.