Indian Stock Markets Plunge as Trump Ends Iran Ceasefire, Oil Prices Surge

Indian stock markets suffered a sharp fall on Wednesday, with the Sensex and Nifty 50 both dropping more than 2%, after US President Donald Trump announced he was scrapping a peace agreement with Iran that had been signed just a month earlier in Islamabad. The Sensex closed down 1,677 points at 76,503, while the Nifty 50 ended at 23,882, a fall of 2.1%.

The trouble began overnight when Iranian forces attacked three commercial oil tankers passing through the Strait of Hormuz, a critical waterway for global oil shipments. This attack set off a chain of retaliatory actions between Iran and the United States. Speaking in Turkey, Trump declared the interim peace deal effectively over, saying he saw no point continuing negotiations with Iran.

This news hit global markets hard, but Indian markets were especially affected because they had just enjoyed a strong rally. Over the previous week, Indian indices had gained 2.4% on hopes that the ceasefire would bring lasting calm to the West Asia region and encourage foreign investors to return after a large sell-off in the prior month.

The collapse of the peace deal reversed that optimism almost overnight. Crude oil prices jumped 6% to around $79-80 a barrel, since any instability in the Gulf region raises fears about disruptions to oil supply routes like the Strait of Hormuz. Higher oil prices are a serious concern for India, which imports most of its crude, because they can push up inflation and strain the government's finances.

The rupee weakened sharply against the US dollar, closing at 95.56 after losing 59 paise in a single session. Meanwhile, bond markets also reacted nervously, with yields on the 10-year government bond touching a three-week high as investors began pricing in the possibility that the central bank might need to raise interest rates to control inflation caused by costlier oil.

The damage on Wednesday was widespread across sectors. Banking, financial services, consumer goods, automobile, and oil and gas stocks all fell more than 2%. A key measure of market fear, the India VIX index, spiked 26%, signalling that investors expect continued turbulence in the near term. Foreign investors, who had just started cautiously returning to Indian markets this month after pulling out large sums in the previous month, are believed to have sold heavily again during Wednesday's crash.

The timing is particularly tricky because investors are now bracing for the start of the April-June earnings season, with technology giant TCS reporting first among major companies. Analysts expect overall corporate profits to decline compared to last year, partly because oil marketing companies are likely to report losses linked to volatile crude prices, and other sectors like pharmaceuticals, aviation, and transportation may also see weaker earnings due to global uncertainty.

India's market troubles were not isolated. US markets had already fallen more than 1% overnight, Japan's Nikkei index dropped 2%, and South Korea's market fell 5% for a second consecutive day amid worries about how sustainable the recent boom in AI-related stocks really is. Taiwan was among the few markets to buck the trend, posting a small gain.