Why Is the Indian Market Stuck? America-Iran War, Crude Oil & Trump Explained

What is the current status of the Indian market?
In the last week of May 2026, the Sensex is trading around 76,000 and the Nifty 50 around 24,000. The Sensex is down about 6-7% from where it was at this time last year. That tells you 2026 has not been good to date.

The Nifty was up about 10% for all of 2025 – which is fine until you realise what the rest of the world was doing.



What the Rest of the World Was Up To
This is the real pain. While Indian markets gave around 10% in 2025, global markets were giving much more:



Kospi (South Korea) +72%

Japan’s Nikkei: +28%

Hang Seng (Hong Kong): +29%

US S&P 500 +17%

China's CSI 300: +17% *

Emerging Markets total: +30%



The gap between India and the MSCI Asia Pacific Index was the widest since 1998, while the underperformance against the MSCI Emerging Markets Index was the worst since 1993, according to Bloomberg data. India's market was giving 10% roughly when the world was giving 25-30% in a year.



The Deep Reasons for India's Lag
1. Corporate earnings weakening
Indian companies have missed profit estimates for about six straight quarters. If companies don't get richer, prices won't rise. Basic maths. IT stocks got mauled with the slowdown in global tech spending. Valuation pressured real estate.

2. Sales by Foreign Investors
International funds were aggressively offloading Indian stocks through 2025 and into 2026. In March 2026 alone, FIIs sold Indian shares worth over Rs. 60,000 crore. Without that money coming in, the market can’t move higher – even if the domestic news is good.

3. High Valuation
Indian stocks were priced at a premium to other markets. Foreign investors were selling India and buying cheaper markets such as South Korea or China which were giving far better returns.



Now let’s talk about the three big forces that are hitting India right now – the America-Iran war, crude oil and Trump.



### America-Iran War: The Biggest Shock of 2026
This is the greatest new factor affecting Indian markets in 2026 — and it is very much an ongoing crisis as you read this.

The Start of the War
The US and Iran had been at loggerheads for years over Iran's nuclear programme. In June 2025, Israel launched a massive military campaign against Iran, a war that lasted exactly twelve days. On June 21, 2025, the United States intervened directly, hitting three Iranian nuclear sites — Fordow, Isfahan and Natanz. A ceasefire was brokered by the US and Qatar on June 24.

Peace was not to be. The economy of Iran collapsed economically after the 2025 war. Its currency plummeted under the weight of fresh sanctions from abroad. By December 2025, there were large protests across Iran. Things went south fast.

On February 28, 2026, the United States and Israel launched massive joint strikes on Iran, targeting Iran's nuclear facilities, military bases and top leadership. This was not a limited operation, this was war on a grand scale. Iran responded with missiles and drones. And then came the move that rocked the world economy.

India’s Worst Nightmare: The Strait of Hormuz
Iran shut the straits of Hormuz.

The Strait of Hormuz is a narrow passage between the Persian Gulf and the Gulf of Oman. But this one waterway transports nearly 20 percent of all the oil and gas in the world. Sounds like just a geography fact. Every day, millions of barrels of oil from Saudi Arabia, the UAE, Qatar, Kuwait and Iraq pass through this strait to reach the rest of the world.

In the case of India, the situation is even worse. Around two-thirds of India's crude oil imports and half of India's LNG (cooking gas) imports transit through the Strait of Hormuz. Iran’s cut-off directly threatened India’s energy supply.

“This was the biggest supply disruption in the history of the global oil market,” the International Energy Agency said, drawing parallels with the 1970s energy crisis.

How this affected Indian markets directly
The effect on the Indian markets was immediate and brutal:

The Sensex fell 2.5% in a single day — closing at 72,696, its lowest level since May 2024 — when Trump issued a 48-hour ultimatum to Iran on March 23, 2026, to reopen the strait and Iran threatened to keep it 'completely closed.' All sectoral indices ended red. Consumer durables, real estate, oil & gas and chemicals lower by 3-6% Financials, metals dropped 2-5%.

Brent crude spiked above $120 per barrel after the Strait closure. QatarEnergy announced force majeure on all exports. Asian spot prices for LNG jumped by more than 140%.

Indian equity markets fell by about 4% in just two days of the conflict intensifying while crude oil soared over 15% at the same time.

India VIX, the market’s fear index, jumped 65% in March 2026. The rupee hit a record low of 96.17 against the dollar on May 18, 2026, down about 5.5% in 2026 alone.

Oil marketing companies such as IOCL, BPCL and HPCL began carrying an estimated Rs 1,000 crore loss every day by selling fuel below the cost. Emkay Global estimated losses for these companies at Rs 57,000-58,000 crore for the quarter at current crude levels.

India’s Awkward Situation
India has remained officially neutral in the conflict. India criticised attacks on American bases without directly naming Iran. Foreign Minister Jaishankar had some positive outcomes from his talks with Iran; two India-flagged LPG carriers were given safe passage through the strait. A coalition of countries also started escorting ships through the chokepoint.

But India spent Rs. 174.9 billion on crude and petroleum products in the financial year ended March 2026 — that is 22% of its total imports. India is the world’s third largest crude importer. Almost no other major economy is as dependent on the Strait of Hormuz as India.

UBS Securities cut its FY2027 GDP growth forecast for India to 6.2% from 6.7% — directly due to the Iran war energy shock. Prime Minister Modi himself had appealed to the Indians to cut down on fuel consumption and buying of gold to tide over the crisis.



Crude Oil: Impact on every Indian life
India sources about 85 per cent of its crude oil. This one fact is why oil prices are not just an energy story, they are an economy story, a market story, a household story.

Watching Oil Prices
Brent crude spent most of 2025 between $60 and $75 a barrel. Then the Iran war altered everything. The Indian basket of crude was at $115 a barrel by April 2026. In May 2026 it was in the $106-110 range. If prices remain around $100 for the entire year, that’s a 40% bump from last year’s prices.

A complete closure of the Strait of Hormuz could see Brent hit $130-150 a barrel – a move that would be disastrous for India’s economy.

High Oil: The Chain Reaction
This is what happens when crude oil prices go up. Petrol and diesel prices rise. Everything that needs to be moved, food, goods, raw materials, becomes more expensive. Inflation rises. When inflation rises, the RBI stops cutting interest rates or thinks of raising interest rates. Higher rates mean higher EMIs, slower consumer spending and pressure on company profits. Stock markets are on edge over all of this.

On May 15, 2026, India increased petrol and diesel prices by Rs. 3 per litre – but that was less than 20% of the actual under-recovery gap. The Strait of Hormuz situation also pushed up shipping insurance premiums and freight costs, hitting India's broader trade between Asia and Europe.

India's GDP is also likely to be impacted by around 0.5% if the high crude situation persists. The current account deficit, the difference between what India earns from exports and what it spends on imports, is widening and adding to the pressure on the rupee

India pays dearly for every $10 rise in crude costs
For some context, a $10 rise in crude oil prices wipes out a large part of India’s fiscal savings and worsens the trade deficit. As Brent jumps from $70 to $110, India's annual import bill goes up by tens of billions of dollars. That money is taken out of the economy, the rupee weakens and the government is forced to either raise fuel prices (hurting consumers) or absorb the loss (hurting the fiscal deficit).



Trump's Statements: A Real-Time Market Earthquake
If there is one person whose words can shake Indian markets in minutes, it is Donald Trump. He has repeatedly hit Indian equities since his return to the White House in early 2025 and his role in the Iran crisis has added another layer of uncertainty. ‘Liberation Day, April 2025
On April 2, 2025, Trump announced sweeping tariffs on all countries – what he dramatically called “Liberation Day.” India was hit with a 26% reciprocal tariff on its exports to the US. On April 7, the Sensex fell nearly 4,000 points in a single day, the Nifty fell below 21,750 and around Rs. 16 lakh crore in market capitalisation was wiped out in minutes. India VIX jumped 56%.

India exports about $87 billion worth of goods to the US, which is equivalent to 2.5% of India’s entire GDP. Sectors such as textiles, pharmaceuticals, gems and jewellery, chemicals and auto components were on immediate threat.

50% tariff escalation
Later, in August 2025, Trump put on another 25% tariff, raising the total tariff burden on Indian goods to 50% – higher than China was facing at that time. These tariffs could cost India up to 20-40 basis points of GDP growth for FY2026, estimates economist.

Trump and the Iran War: Double Trouble for India
For Indian markets, Trump’s role has created a whole new problem in the form of the Iran war. Trump, as a decision-maker, is the main driver of the US-Iran conflict, so he moves oil prices and market sentiment simultaneously.

On March 23, 2026, Trump issued Iran a 48-hour ultimatum to reopen the Strait of Hormuz, threatening to attack Iranian power and energy infrastructure if they did not comply. Iran has threatened to shut the strait completely. The Sensex dropped 2.5% that one day.

On May 18, 2026, Trump publicly rejected Iran’s latest diplomatic letter, signalling the conflict was far from over. That held oil prices high and markets jittery.

In Pakistan-mediated indirect talks, the US and Iran also flopped, with neither side ready to make key concessions. Today the market’s eye is on every statement on Iran from Trump with the same intensity as RBI policy decisions.

Solar Sector Shock - Feb 2026
The US announced preliminary countervailing duties of 126% on Indian solar panels and photovoltaic cells in February 2026. Indian solar stocks fell that day, but analysts said the effect on long-term earnings could be limited.

Reaction in India
India-US trade talks did make some progress – after diplomatic negotiations, PM Modi welcomed a lower tariff of 18% on ‘Made in India’ products. India too has significantly increased its imports of US crude oil in a goodwill gesture — the market share of US crude has tripled between February and April 2026. Complete bilateral trade deal still in negotiation.



Winners from India?
Not everything fell, pressure or no pressure.

PSU stocks were star performers in 2025 – Hindustan Copper was up 68%, NALCO 56%, BEL 35% and BHEL 28%. SBI has given returns of around 25%. In fact, defence stocks such as BEL moved up during the volatility of the Iran war, bucking the trend.

Gold hit a record Rs. 14,635 per gram in March 2026. The classic safe-haven play when markets are scared. Metals stocks, including Hindalco and Vedanta, also rose as geopolitical tensions resulted in tight supply and higher commodity prices.

Domestic SIP investor continues to be the backbone of the market. Equity mutual fund inflows crossed Rs 3.22 lakh crore through November 2025. Without this steady home buying, the market would have fallen a lot further.



What will the rest of 2026 look like?
One thing the picture depends heavily on is how the America-Iran war plays out.

If the Strait of Hormuz opens fully and oil prices come down to $70-75 a barrel, it is a big relief for India. Inflation cools, company margins recover and foreign investors may come back, and the RBI can start cutting rates again. Brokerages still have Nifty targets of 28,300-29,120 for year-end, implying an upside of 12-15% from current levels.

If the conflict continues and oil stays above $100, the outlook becomes much harder. If there is a prolonged oil shock of $100+ for 3-4 months, inflation will rise sharply, EMIs will go up, company profits will be squeezed and India’s GDP growth could fall below 6.2%. The rupee would come under further pressure.

A key positive would be the signing of an India-US trade deal that is yet to happen. RBI has been cutting rates in between the volatility which supports rate sensitive sectors. Still strong foundations: Domestic consumption and the SIP culture.



Plain English Summary
Picture the Indian market as a gifted cricketer going through a difficult patch. The technique is still good, the fundamentals are still solid – but they’re facing fast bouncers from three directions simultaneously. The America-Iran war has thrown the world’s most important oil route out of balance. Crude prices have jumped above $100 and threaten to go even higher. And whether on tariffs or on Iran ultimatums Trump’s statements can move Indian markets within hours.

India is especially vulnerable. It imports 85% of its oil, two-thirds of which passes through the very strait Iran has threatened to shut. It exports a lot to the US, which now has high tariffs. Its stock market also entered 2025 at expensive levels, and foreign investors were quick to unload in the face of trouble.

Good news is the long-term India story is intact. A strong foundation of growing middle class, young workforce, rising SIP culture and stable political environment. Wars end. Oil shocks go by. Trade agreements are signed. And when the dust settles, as it always does, India’s market has some real running room.


Until then, watch three things every morning: Brent crude prices, the rupee-dollar rate, and what Donald Trump said about Iran last night.