Markets bleed as Iran conflict escalates; Rupee hits historic low of 95.43

Indian benchmark indices Sensex and Nifty plunged in Tuesday’s trade as fresh military strikes in the Gulf region sent shockwaves through global markets, driving the rupee to a record low and crude prices higher.

Indian equity markets faced a wave of heavy selling on Tuesday morning, with the BSE Sensex crashing over 600 points to slip below the crucial 77,000 mark. The Nifty50 followed suit, tumbling 140 points to trade under 24,000 as investors reacted to escalating tensions between US and Iranian forces in the West Asia region.

The sell-off was exacerbated by the Indian rupee, which plummeted 20 paise to hit an all-time low of 95.43 against the US dollar. Forex dealers noted that the breach of the 95-level has triggered panic among importers, while foreign investors continue to pull capital out of emerging markets in favor of the "safe-haven" greenback.

Conflict in the Gulf rattles Dalal Street

The primary trigger for the market rout is the reported exchange of fire in the Strait of Hormuz. Initial reports indicate that US military forces intercepted Iranian drones and cruise missiles targeting shipping lanes, leading to fears of a complete blockade of the world’s most vital oil chokepoint.

The geopolitical uncertainty has ended the brief optimism seen on Monday following domestic state election results. While the market initially cheered policy continuity, that sentiment has been completely overshadowed by the risk of a prolonged energy crisis.

Brent crude nears $114 per barrel

For an oil-dependent economy like India, the spike in global crude prices is the biggest concern. Brent crude rose toward $114 per barrel on Tuesday morning. Market analysts warn that if the Strait of Hormuz remains contested, prices could easily test the $120 mark, further widening India's current account deficit.

"The market was already on edge, but the latest military activity in the Gulf has changed the risk calculus," said a senior research head at a Mumbai-based brokerage. "We are seeing a flight to safety, and the pressure on the rupee is making the situation even more volatile for FIIs."

Banking and Finance stocks lead the fall

Inside the 30-stock Sensex pack, the pain was widespread. Heavyweights like Bajaj Finance, ICICI Bank, and Bajaj Finserv were among the top losers, shedding up to 2% in early deals. Out of the 30 Sensex stocks, only 12 managed to trade in the green, primarily in the defensive IT and Pharma sectors.

The midcap and smallcap segments, which often see higher volatility, were also trading with significant cuts as retail investors turned cautious.

Foreign investors continue selling spree

The pressure on the markets is being fueled by persistent selling by Foreign Institutional Investors (FIIs). Data shows that over the last seven days, FIIs have offloaded shares worth ₹7,681 crore. This trend has been consistent throughout early 2026, with over $20 billion pulled out of Indian equities and bonds as global risk aversion peaks.

While Domestic Institutional Investors (DIIs) have attempted to support the market with net buying of over ₹10,000 crore in the same period, their efforts have been insufficient to stem the tide of the global sell-off.

Outlook remains tied to West Asia

Market participants are now keeping a close watch on the situation in West Asia and the upcoming Q4FY26 earnings season. Any further escalation in the Gulf could lead to another leg of the downward movement.

"Until there is clarity on the safety of the shipping routes, we expect the markets to remain in a 'sell on rise' mode," a floor trader noted. "The immediate support for Nifty is now at the 23,800 level, and if that breaks, we could see deeper cuts."