US-Iran war: US President Donald Trump, in his address to the nation on Wednesday, hinted that Washington could end its military operation in Iran in the coming two to three weeks. He, however, avoided giving any definite date and also said the US will hit the West Asian country hard during this period.
Moreover, Trump in his speech also avoided giving any signals about what will happen to the Strait of Hormuz, which is choking off oil supply, driving prices to multi-year highs.
Markets globally fell sharply after Trump’s aggressive tone on Iran and the persisting uncertainty over the reopening of the Strait of Hormuz.
The Sensex and the Nifty 50 crashed more than 2% during Thursday’s session. Among other Asian markets, Korea’s Kospi crashed almost 5%, while Japan’s Nikkei dropped nearly 3%. Brent Crude prices jumped 7% to $108 per barrel.
What the US-Iran war means for equity investors?
The war in West Asia is a major matter of concern for India because it has driven oil prices to multi-year high levels.
Since India is the world’s third-largest oil importer, which imports about 85-90% of its total oil requirements, elevated oil prices are a significant macro challenge.
The worst part is that the war is still continuing, and the US President has threatened that the US military will hit Iran more aggressively during the next few weeks, which has raised concerns that the war could stretch for a longer period if Iran retailiates aggresively, resulting in further damage to energy production and supply infrastructure in the region, which can lead to higher-for-longer crude oil prices.
According to brokerage firm JM Financial, in a worst-case scenario, crude oil prices may remain elevated at $110 per barrel throughout FY27, which can increase India’s oil import cost by 32% to $250 billion, widening the current account deficit (CAD) to 2% of the country’s GDP.
Crude’s jump may keep the Indian rupee under pressure, distorting India’s growth-inflation dynamics, leading to tighter monetary policy. At a cursory glance, it appears that the Indian stock market is going to have a challenging financial year 2026-27 (FY27).
“It is difficult to predict the market outlook for FY27, given the geopolitical uncertainties due to the ongoing Iran war. If we see extended disruption to energy supply and higher prices, then the knock-on effects on FY27 earnings growth will be visible over the year,” Krishnan VR, the head of quantitative research at Marcellus Investment Managers, told Mint.
How to tweak your stock portfolio?
Persisting uncertainty over the US-Iran war and the reopening of the Strait of Hormuz signal that the domestic market may remain volatile in the short term. It is also feared that the crude oil prices may not come back to the normal level anytime soon, which means the pressure on the domestic market will continue.
The ideal way is to look at large-caps with solid fundamentals from the sector that has crashed more deeply over the recent weeks.
“At present, focusing on large-cap stocks is definitely the more logical move. The current turmoil we are seeing is essentially an energy crisis, and since it is an imported issue rather than an internal one, it eventually triggers inflation and creates challenges across various sectors,” Ajit Mishra, SVP of Research at Religare Broking, noted.
Mishra underscored that the current macroeconomic set-up is particularly difficult for smaller players—the mid and small-cap companies.
“They often struggle to pass on these escalated costs to the end consumer because they need to maintain their customer relationships, meaning they are more likely to take a direct financial hit. Larger companies, however, have more leeway and can pass at least a partial burden of these costs to the consumer,” he said.
“While the energy crisis has pinched every sector in some way, either directly or indirectly, you want to find the ones that will take less time to recover compared to others,” said Mishra.
Mishra recommends adding stocks from the banking, BSFI space, auto, pharma, and energy sectors. He, however, cautions that one should avoid aggressive buying and look for stocks in these sectors with valuation comfort and stable results.
Kiran Jani, the head of technical research at Jainam Broking , suggests a rotation from overextended cyclicals into the massive valuation anomaly in IT, FMCG, and BFSI.
“We are playing a ‘policy + currency’ arbitrage. With the rupee testing ₹95, IT services (21 times PE versus the average of 24.5 times) get an automatic margin boost. In FMCG (33 times PE versus the average PE of 42 times), we see a pure mean reversion play. Lower direct taxes and GST rationalisation are finally driving volume growth. BFSI remains the anchor, trading at 21.6 times PE with steady 15% credit growth,” Jani said.
“IT and BFSI are your bunker. The weak rupee protects exports while banks provide the earnings backbone. If the US-Iran tension eases, the market may see a violent risk-on rally. Crashing oil and freight costs will supercharge FMCG margins and trigger a 16% market earnings surge. Accumulate now. Don’t wait for the right bottom or right time to chase the 20% valuation discount,” Jani emphasises.
Krishnan of Marcellus Investment Managers told Mint that one can consider strong businesses available at reasonable valuations within healthcare, pharma, export-led manufacturing names and broader financial services.
Diversification into global equities should also be considered, Krishnan said, to play certain themes like AI, high-end manufacturing, among others.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
