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Informist, Monday, Mar. 2, 2026

 

By Eshitva Prakash

 

MUMBAI – The benchmark equity indices are likely to fall further Wednesday as crude oil prices are expected to remain high in the near term on fears of a prolonged disruption of shipping in the Strait of Hormuz, a critical transit route that accounts for nearly 20% of global crude oil and gas flows. Indian equity markets are closed Tuesday for Holi.

 

Near-term market movement is likely to depend upon how long hostilities between the US and Israel on one side and Iran on the other continue. Some analysts expect a quick recovery on hopes of an early resolution to the conflict. Others are bracing for more pain after US President Donald Trump said the US attacks would continue.
 

Trump has indicated that military operations in Iran could extend for up to five weeks. He also said sanctions relief is possible if Iran's new leadership signals a willingness to engage constructively with the US. Iran's Supreme National Security Council Secretary Ali Larijani Monday, however, denied any intention of resuming talks with the US and signalled that there would be no dialogue.

 

The sharp rise in crude oil prices will hurt India's macroeconomic stability by putting pressure on the country's currency, current account deficit, and domestic inflation, analysts said. Emkay Global Financial Services expects aggressive short-term selling by foreign portfolio investors and a renewed run on the rupee. The brokerage expects the Nifty 50 to test the 24500-point level and even go lower if the conflict lasts longer than a week. If the hostilities end within a week, the market should revive just as quickly, the brokerage said.

 

The greatest risk from the continued hostilities is a possible blockade of the Strait of Hormuz. "Depending on the duration of the disruption to shipping, this would lead to a noticeable tightening of oil supplies and a sharp decline in inventories," Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report. Crude oil prices would then rise significantly. "According to a calculation by Bloomberg, the price increase could be four times the percentage decline in supply," Fritsch said.

 

Given the global risk-off sentiment, the equity markets are likely to remain volatile. Oil marketing and aviation companies and paint, tyre, and chemical manufacturers face margin pressures from higher input costs. Upstream oil producers such as Oil and Natural Gas Corp. and Oil India may benefit from stronger realisations, analysts said.

 

Investor attention is likely to be focused on sectors such as defence amid expectations of higher strategic spending and on upstream oil companies, which could benefit from increased energy prices, Siddhartha Khemka, head of research, wealth management, at Motilal Oswal Financial Services, said in a note. In contrast, export-oriented sectors could face near-term headwinds amid global risk aversion and potential demand disruptions. "At this stage, the greater concern is not a prolonged supply shock but short-term disruptions and uncertainty, which in themselves can sustain elevated prices," Khemka said. Among specific stocks, Larsen & Toubro, Kalpataru Projects International, and KEC are among the companies that may face near-term export issues, JM Financial Securities said in a research report.

 

The unfolding crisis in West Asia has pushed Brent crude to nearly $80 per barrel and the rates are expected to remain high in the near term, Sumit Pokharna, vice-president of fundamental research at Kotak Securities, said in a note. The upward movement reflects both tangible supply-side risks and increased geopolitical risk premium, he added.

 

India imports roughly 85% of its crude oil requirement and higher prices present macroeconomic and sector-specific challenges. Oil marketing companies are particularly vulnerable, as high crude oil prices compress their refining margins, increase operating and working capital requirements, and lead to higher borrowing costs and debt levels, Pokharna said. If the current rates hold, an upward revision in retail fuel prices remains a possibility, though any such change may not be made immediately, he said.

 

Given the high crude oil prices and possible supply disruption from the Persian Gulf region, India may continue to buy Russian crude oil, an analyst at a domestic brokerage said. This, however, comes with its own set of problems and could add to trade uncertainty, given that the US had previously imposed a punitive 25% tariff on India for buying Russian oil. The analyst, however, expects the US to be more supportive of the idea in the near term as higher crude oil prices mean higher inflation in the US, which would run counter to Trump's desire to see interest rates cut steeply.

 

There is also likely to be a rush to buy safe-haven assets such as the dollar and gold. Bullion is likely to stay strong after Trump indicated that military operations will continue, analysts said. The strong rally indicates that a significant portion of the geopolitical premium may have already been priced in, Kaynat Chainwala, assistant vice-president of commodity research at Kotak Securities, said.

 

The technical view of the Nifty 50 does not look very promising either. The immediate crucial support for the 50-stock index is placed at 24600 points, Rupak De, technical analyst at LKP Securities, said. A decisive breakdown below this level could trigger a deeper correction, he said.

 

The Nifty 50 is likely to encounter resistance at 25000 points, De added. "Until the Nifty (50) reaches above 25000, overall sentiment is likely to remain tilted in favour of the bears," he said. Monday, the 50-stock index closed at 24865.70 points, down 312.95 points or 1.2%. The BSE Sensex ended at 80238.95 points, down 1048.34 points or 1.3%.  End

 

US$1 = INR 91.47

 

Edited by Rajeev Pai

 

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