By Kimberley Kao
Indian stocks had their worst day in nearly two years as risk-off sentiment swept the market, spearhead by escalating fighting in the Middle East.
The benchmark Sensex ended 3.3% lower at 74207.24, suffering its biggest one-day drop since June 2024. That came as a trifecta of geopolitical risk, a more hawkish-sounding Federal Reserve and another surge in oil prices spooked investors across Asia.
Indian markets have been weighed down heavily by the impact of the Iran war, as the country is a major energy importer with limited strategic reserves, leaving it vulnerable to price swings.
Since the fighting began, the Sensex has shed roughly 7.5%. The rupee has hit new lows against the dollar, as a flight-to-safety buoys the greenback and rattles emerging-market currencies.
It's not just oil that threatens to squeeze India. Analysts at Elara Capital led by Gagan Dixit point out that two-thirds of India's liquefied imports pass via the Strait of Hormuz, adding a supply risk on the gas front.
The conflict has ground traffic via the shipping lane to a virtual halt, sending energy and other commodity prices soaring.
However, India still has a meaningful tax buffer, the Elara analysts said, and excise duties on gasoline on diesel could provide shock absorption.
They estimate that retail gasoline and diesel prices could be fully protected via excise cuts until oil hits $110 barrel. Beyond that point, crude, gasoline and diesel price hikes would become inevitable.
At $150 a barrel, the required rise would be enough to make the inflation shock visible and politically sensitive, Elara's Dixit wrote in a report.
Front-month Brent crude oil futures were last 6.7% higher at $114.54 a barrel.
Energy stocks were broadly lower in India as investors fretted about profit margins squeezes for marketers and refiners, and the potential threat of inflation shocks.
Hindustan Petroleum and Bharat Petroleum were down 7.1% and 5.8%, respectively. Petronet LNG shed 6.8%.
Banking stocks were also among the biggest losers on Thursday.
HDFC Bank ended 5.1% lower after its part-time chairman stepped down. The lender announced the move early in the session, citing a letter from Atanu Chakraborty saying that he was stepping down over practices that went against his personal values, without elaborating further.
The Reserve Bank of India said it had taken note of recent developments at the bank and approved the interim of appointment of Keki Mistry to fill the role.
"There are no material concerns on record as regards its conduct or governance," the RBI said. "The bank remains well-capitalized and the financial position of the bank remains satisfactory with sufficient liquidity."
Bajaj Finance fell 5.4% and Axis Bank lost 3.7%.
Write to Kimberley Kao at kimberley.kao@wsj.com
(END) Dow Jones Newswires
March 19, 2026 07:06 ET (11:06 GMT)
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