Iran-Israel War Continues, But How Are Indian Markets Still Staying Calm?
Despite rising tensions in the Middle East and climbing crude prices, Indian stock markets have stayed largely unshaken. Here's why that’s happening.
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Markets Unfazed Even as Middle East Conflict Escalates
On the fifth day of the ongoing Iran-Israel conflict, Tel Aviv claimed it had taken out Iran’s wartime chief of staff. Israel even issued a threat to Supreme Leader Ayatollah Ali Khamenei, warning he could meet the same end as Saddam Hussein.
As the conflict escalated, U.S. President Donald Trump urged civilians to evacuate Tehran, while denying reports of any ceasefire talks with Iran. The world watched anxiously, but back home in India, markets didn’t mirror the global concern.
Despite the dramatic headlines, investors in Indian stock markets have shown little reaction. The Sensex, India’s benchmark index, has barely moved in the past week.
Stock Index Holds Steady While Conflict Intensifies
A day before Israel launched its first missiles on Tehran, the Sensex had closed at 81,691.98. By Tuesday, five days and three trading sessions later, it settled at 81,583. That’s just a 108-point drop or a modest 0.13% decline, despite the ongoing geopolitical crisis.
While the equity markets have remained calm, crude oil prices have ticked upward, showing an 11% jump, from $67.34 per barrel on June 12 to around $74.6 by Tuesday.
India’s Limited Exposure to Iran Brings Stability
So, why this calm in the face of global chaos?
Experts point to India’s relatively secure macroeconomic position, low inflation, and minimal trade links with Iran. The conflict hasn’t targeted Iranian oil facilities yet, something that could potentially alter the market dynamics.
Analysts say that unless Israel begins attacking Iran’s energy infrastructure, or unless supply chains are disrupted, the current spike in crude is more psychological than structural.
Cushion from OPEC
OPEC members, led by Saudi Arabia, currently have excess production capacity. That serves as a safety net. As long as Iranian oil installations remain untouched, supply isn’t expected to tighten drastically.
Pankaj Pandey, Head of Research at ICICI Securities, noted that inflation in India is still manageable. This has given comfort to market participants, even as crude prices show an upward trend.
Madan Sabnavis, Chief Economist at Bank of Baroda, echoed a similar sentiment. According to him, only a significant and sustained rise in oil prices would start pressuring India’s macroeconomic fundamentals, especially by bloating the import bill and increasing wholesale price inflation.
Inflation Numbers Still Supportive
In May, India’s Wholesale Price Index (WPI) slipped to a 14-month low of 0.39%, down from April’s 0.85%. Meanwhile, the Consumer Price Index (CPI) inflation for April stood at just 3.2%, its lowest level in nearly six years.
The Reserve Bank of India’s latest monetary policy report projects CPI inflation at 3.7% for FY 2025-26, indicating that price pressures remain largely under control. That’s a key reason why market reactions have been muted so far.
Oil Prices Do Matter, But the Alarm Hasn’t Rung Yet
Oil, of course, holds weight in India’s economic equation. The country imports nearly 85% of its crude oil needs, and oil imports make up more than a quarter of the total import bill. A rise in prices directly affects the current account balance and inflation numbers.
Crude-related products form over 9% of the WPI basket. A 10% hike in oil prices could raise WPI inflation by nearly 0.9%. But so far, markets aren’t reacting as if the worst-case scenario is unfolding.
Experts say the current uptick in crude is driven more by fear than by actual supply disruptions. Unless that changes, the Indian economy and its markets are likely to stay steady, despite the fire raging in the Middle East.