Israel-Iran war: Has Indian stock market discounted Middle East tension or Nifty 50 hitting 24,000 still a possibility?

Israel-Iran war: Indian benchmark indices - Sensex and Nifty 50 - bounced back from early losses to trade in positive territory on Wednesday, driven by financial and auto stocks, despite cautious global sentiment due to escalating tensions in the Middle East and elevated crude oil prices.

Around 9:43 am, the BSE Sensex was trading 264 points, or 0.33 per cent, higher at 81,854, while the Nifty50 advanced 81 points, or 0.32 per cent, to 24,932. The Sensex saw a strong recovery, surging 550 points from its intraday low of 81,304.

According to market experts, the Indian market appears to have largely discounted the Israel-Iran tensions, with Monday’s positive close reflecting that investor focus is shifting back to domestic fundamentals.

“While oil and geopolitical risks remain on the radar, Nifty’s resilience amid global unease suggests the conflict is being viewed as a short-term event rather than a structural threat and investors are focusing on the long-term story of the Indian economy which remains intact and every dip is viewed as a buying opportunity,” said Sourav Choudhary, MD, Raghunath Capital.

Anubhav Sangal, Sr. Research Analyst at Bonanza, also believes the market appears to be pricing in a contained conflict scenario rather than a prolonged regional war.

“The Indian stock market has partially discounted the Israel-Iran war, demonstrating both vulnerability and resilience. However, the discount is incomplete and conditional,” Sangal cautioned.

Israel-Iran war sparks rise in crude oil, gold prices

While strong economic growth, lower inflation, positive or benign monetary policy, and renewed interest of foreign planners have kept the market afloat. Analysts believe that a shoot up in crude oil prices remains a risk.

The recent attacks have seen crude oil prices flare up, with Brent rising to a near five-month high of $76, posing risks for India, given that oil is imported in large quantities. The situation would set an inflationary tone and weaken the currency, which will in turn slow down growth, according to Puneet Singhania, Director at Master Trust Group.

The crude oil prices have already jumped 10 per cent amid the fresh Middle East conflict, and any further escalation could push them up another 8-9 per cent. 

"Israel's airstrikes on Iran have sparked fears of supply disruptions, causing crude oil prices to surge. The worry is that the situation could escalate into a full-blown regional crisis, which would have significant implications for global oil supplies," commented Navneet Damani, Group Senior VP, Head Commodities Research, Motilal Oswal Financial Services.

Meanwhile, gold marked an all-time high of ₹1 lakh on the domestic front and hovered close to $3500 in the international markets, as investors sought safe-haven assets after Israel's strike on Iran heightened Middle East tensions.

What should be your trading strategy amid Middle East tensions?

While the ongoing escalation hasn’t reached a threshold to trigger a sharp market reaction, analysts warn that if tensions intensify further, a significant correction is likely.

Swapnil Aggarwal, Director, VSRK Capital, said, “However, such a correction should be viewed as a ‘buy on dips’ opportunity, as the broader fundamentals remain strong. If geopolitical tensions flare up again, the most immediate impact would likely be felt in the oil markets.”

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.