Indian markets shed more than 3% on Monday’s early trades amid rising tensions in West Asia (Middle East), a steep rise in crude oil prices, and weak global cues.

Nifty 50 and Sensex fell by more than 3% each to touch their respective intraday lows of 23,697.80 points and 76,424.55 points.

Key Factors Behind The Fall

Crude Prices Catapulted Above $115/ Barrel

Brent crude surged over 26% to $117.16 per barrel for the first time since 2022. This happened due to the US-Iran war and the consequent disruption to shipping through the Strait of Hormuz, with major oil producers in the Middle East cutting supplies.

India imports about 90% of its crude oil, and this is likely to increase its import bill. The sharp surge can increase inflation, weaken the rupee, hamper economic growth and impact profitability of companies.

Rupee Falls To A Record Low

The Indian Rupee touched a record low of 92.3375, driving panic selling. This decline can aggravate foreign capital outflows, heighten inflationary risks, and weigh on corporate earnings.

No Signs Of War Ending Soon

There are no signs of the war ending soon. Iran has appointed a new leader. This is widely seen as a signal that Tehran is not ready to back down from the war. Calls for a ceasefire have also been rejected. Analysts believe that if the war continues, it could have a serious impact on India’s macro outlook and market sentiment.

US Dollar, Bond Yields Jumped

The Dollar Index jumped by half a percent and bond yields rose to 4.21%, signalling that foreign institutional investors may continue selling stocks in emerging markets like India, given that the country is significantly exposed to crude oil shocks, and a weakening currency.