It has been nearly two months since the US-Iran war began, and these two months of heightened geopolitical uncertainties and elevated crude oil prices have shattered the risk appetite of investors.
The combined forces of the US and Israel attacked Iran on 28 February, dealing a blow to stock markets globally. Indian stock market benchmark Nifty 50 plunged over 11% in March.
On 2 April, the index touched its recent low of 22,182, but saw a healthy recovery after that, reacting to diplomatic efforts towards ending the war. So far in April, the index is up about 9%. Still, year-to-date, the Nifty 50 is down 7%.
While the worst in terms of war may be behind us, there are still uncertainties about the timeline of a potential final deal between the US and Iran and how both sides will iron out key bones of contention.
There are also concerns that even though the war ends, the impact of elevated crude oil prices will not fade away quickly.
“Even if peace returns and the Strait of Hormuz fully reopens in the second half of 2026, a return to the $60–70 per barrel range remains unlikely as the market is dealing with a deep inventory deficit, not just a temporary supply shock. As a result, stock rebuilding, logistics repricing, and repair costs are expected to keep oil prices structurally supported, with near-term equilibrium above near $80 per barrel,” said Equirus Securities.
Time to be worried?
According to experts, investors should worry less about the headline shock and more about the second-order effects, because for India, the real risk is not only higher crude, but its consequences, such as a weaker rupee, costlier imports, tighter liquidity, pressure on bond yields, and a squeeze on margins for fuel-intensive sectors.
If the war lingers, the Indian economy may move into a stage of lower growth and higher inflation. However, if de-escalation happens, leading to the opening of the Hormuz Strait, the macroeconomic damage, including the second-order impact, can be managed.
Corporate earnings will also depend on the duration of the conflict and the extent of the energy shock.
VK Vijayakumar, chief investment strategist at Geojit Investments, noted that till now, the impact of the war and spike in crude price has been manageable. However, if the war lingers longer, second-order effects will start impacting.
“Since the crude price hike has not been passed over, the inflationary impact is insignificant. But if crude prices remain elevated, some pass-through of higher cost will become inevitable. This will raise the cost-push inflation and, importantly, push up inflationary expectations. Gas shortages have already impacted some industries like tile manufacturing and fertilisers,” Vijayakumar said.
Shashank Udupa, a SEBI-registered research analyst and Fund Manager at Smallcase, believes the second-order effects are what will blindside most investors.
“The first-order impact (oil spike) is already priced in. What markets are underestimating is everything that follows, like shipping costs up 300%, frozen fertiliser supply chains, re-igniting inflation, and central banks that were supposed to cut rates now pausing or hiking. Supply constraints, especially with storage limits, can keep prices elevated even after tensions ease,” said Udupa.
Earnings may take a hit
Divam Sharma, Chief Executive Officer and Co-founder of Green Portfolio, agrees that the concerns are legitimate but manageable.
“Brent crude has swung from sub-$80 to north of $120 per barrel since hostilities began. This directly pressures margins in paints, chemicals, cement, tyres, aviation and FMCG, where crude derivatives are core inputs. Q4 FY26 earnings will remain largely insulated thanks to inventory buffers and benign January–February prices, but Q1 FY27 is where the real transmission begins. RBI’s 70 bps GDP cut to 6.9% reflects this lag,” Sharma said.
Bhuvan Gupta, CIO, Client First Capital, believes that while most sectors will be affected either via the rise in energy prices or due to supply chain disruptions, airlines, oil refiners, paints, fertilisers and restaurants are expected to be the worst hit.
“All the preliminary estimates from various institutions forecast a lowering of corporate earnings, potentially 9-10% for FY 27. These estimates are based on two key assumptions – the price of crude being range bound between $80-$120 per barrel and a swift resolution to the war now that the impact is being felt by almost all major economies,” said Client First’s CIO.
Kalp Jain, a research analyst at INVasset PMS, underscored that so far, the hit to corporate earnings looks uneven rather than broad-based.
According to Jain, oil marketing companies, aviation, paints, chemicals, logistics and other energy-sensitive businesses face the biggest near-term risk, while banks could also feel pressure if inflation delays rate relief.
“At the macro level, the RBI’s oil pass-through estimate suggests a 10% crude rise can add about 30 basis points to inflation if fully transmitted, though March CPI at 3.4% indicates the initial impact is still manageable. India’s broader growth base remains intact, but if crude stays elevated for longer, earnings downgrades and GDP cuts will likely become more visible in FY27,” said Jain.
According to Udupa, airlines, OMCs, FMCG, and fertiliser companies will be bearing the brunt. Financials and domestic metals are relatively safer. Nifty valuations look reasonable, and if everything stabilises over time, there’s room for a meaningful re-rating led by domestic sectors.
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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.
