Sensex tumbles 350 points, Nifty below 23,150 as Iran shuts Strait of Hormuz after US strikes. What lies ahead?

Indian stock market slipped into the red on Thursday, with Sensex and Nifty falling 0.6% each as renewed tensions in the Middle East and the subsequent closure of the Strait of Hormuz spiked oil prices, spooking investors.

Sensex dropped more than 350 points to 73,600, while Nifty declined over 100 points to 23,100 level on Thursday. Broader markets continued to record losses, with the Nifty Midcap 100 and Nifty Smallcap 100 indices also falling around 0.6% each.

IndiGo, Kotak Mahindra Bank, HCLTech, Infosys, TCS, and SBI shares were the top losers on the Sensex, falling up to 3%. Power Grid, ICICI Bank, and a few other stocks, meanwhile, recorded marginal gains.

All sectoral indices opened in the red, with Nifty IT plunging more than 2% to lead losses. Nifty Auto, Nifty Consumer Durables, and a few other sectoral indices fell around 1% each. Around 1,740 stocks declined on the NSE, while 696 advanced and 97 remained unchanged.

The US launched additional strikes against Iran, and President Donald Trump vowed even more attacks if no peace deal is secured. Trump told Fox News on Wednesday evening that the strikes would stop shortly but that he would "bomb the sh*t out of them" if Iran's leaders did not sign an agreement with the US immediately.

Iran retaliated by declaring the Strait of Hormuz closed on Thursday, saying any vessel attempting to pass through would be shot at.

Oil prices jumped as a result of the closure of the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.

Brent crude futures surged around 2% to trade near $95 per barrel, while WTI crude futures gained more than 2% to trade near $92 per barrel. The rupee, meanwhile, tumbled 35 paise to 95.60 against the US dollar in early trade.

What lies ahead?

The off-and-on geopolitical drama in West Asia continues, with the latest escalation in the conflict pushing Brent crude to $95 again, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He highlighted that inflation in the US has spiked to 4.2%, indicating the possibility of a rate hike by the Fed, irrespective of the Fed chief Kevin Warsh’s views on rates and what President Trump wants from the Fed. A further rise in US bond yields is likely, and this will have a negative fallout on US stocks, he added.

“The weakness in US tech stocks since last Friday is likely to gather momentum. But as things stand now, this is unlikely to turn the FIIs into buyers in India, as there is very low interest by FIIs in India now. The scenario may change if there is a deep correction in AI stocks. Therefore, we will have to wait and watch the trends in AI stocks,” he further said.

The initiatives by the RBI and the government have stabilised the rupee to an extent, but this is not good enough to impart any enthusiasm in the market, according to the analyst, who believes that the weakness might linger for some time.