Explained: How Middle East war is influencing Dalal Street stocks and sectors

Escalating tensions between the United States, Israel and Iran are sending shockwaves through global financial and commodity markets, with rising oil prices and growing supply concerns triggering volatility across multiple sectors.

From crude oil and precious metals to aviation, chemicals and aluminium, the geopolitical crisis is creating ripple effects that are being felt in India as well as the wider global economy.

Oil prices surge amid supply fears

The most immediate impact of the conflict has been a sharp rise in oil prices. Global crude prices have climbed nearly 9–10 per cent in the past week amid fears that supply routes in the Middle East could be disrupted.

A key concern for markets is the Strait of Hormuz — a strategic maritime chokepoint through which around one-fifth of global oil shipments pass. Any disruption to traffic through the strait could significantly affect global energy supply.

Brent crude prices have surged to around $80 per barrel in over-the-counter trading, with analysts warning that further escalation in the conflict could push prices even higher.

Shipping activity in the region has already been affected, with some tanker operators reportedly pausing shipments through the strait amid security warnings.

Safe-haven demand pushes gold and silver higher

Heightened geopolitical uncertainty has also boosted demand for safe-haven assets such as gold and silver.

Gold prices have rebounded strongly after weakening in recent weeks, climbing more than 2.5 per cent as investors moved funds into safer assets amid global instability.

This surge in precious metal prices has increased trading activity in commodity markets.

Higher volatility could benefit MCX

The rising volatility in commodity prices is expected to benefit the Multi Commodity Exchange of India (MCX), which facilitates trading in bullion and energy commodities.

More than 95 per cent of MCX’s revenue comes from bullion and energy products, particularly gold, silver and crude oil. Heightened price fluctuations typically attract both hedgers and speculative traders, boosting trading volumes on the exchange.

If uncertainty around global energy supplies continues, trading activity in these commodities could remain elevated.

Indian stock markets feel the pressure

Indian equity markets have also reacted sharply to the geopolitical developments.

Benchmark indices fell steeply in early trade earlier this week as oil prices surged and investors grew concerned about inflation and supply disruptions.

The BSE Sensex dropped more than 2,700 points in early trading, while the NSE Nifty 50 fell over 500 points after reports that Iran had restricted navigation through the Strait of Hormuz.

Although markets later recovered some of their losses, the volatility highlights how sensitive financial markets remain to geopolitical risks.

Aviation and travel sectors take a hit

Airlines and travel companies have been among the worst-affected sectors.

Shares of airline operators and travel service providers declined sharply amid concerns over higher fuel costs and disruptions to flight routes.

Tour operators have also reported an increase in booking cancellations and rescheduling requests as airspace restrictions across parts of West Asia disrupt travel routes between India and Europe.

Pressure on automotive and tyre companies

Rising crude prices could also create cost pressures for the automotive industry, particularly tyre manufacturers.

Tyre production relies heavily on crude-based derivatives as raw materials. As oil prices rise, input costs increase, potentially squeezing profit margins.

Export-oriented companies may also face higher shipping costs and logistical disruptions due to the ongoing instability in global trade routes.

However, analysts note that strong domestic demand for vehicles could partly cushion the impact.

Chemical sector faces rising costs

The Indian chemicals sector may also face headwinds from the conflict.

Many chemical producers depend on raw materials derived from crude oil, including naphtha, ethylene, benzene and propylene. Rising crude prices could therefore push up input costs.

At the same time, shipping delays, higher freight charges and rising insurance costs could disrupt supply chains and raise overall production expenses.

If the conflict persists, companies could struggle to pass on higher costs to customers, potentially squeezing margins.

Aluminium sector may benefit

In contrast, India’s aluminium industry could gain from rising global prices.

Aluminium prices on the London Metal Exchange have risen nearly 4 per cent amid concerns that the Middle East conflict could disrupt regional production and exports.

The region accounts for roughly eight per cent of global aluminium production, and millions of tonnes of the metal are shipped annually through the Strait of Hormuz.

If shipping routes are disrupted, global aluminium supply could tighten further, supporting higher prices — a development that could benefit Indian producers.

Global markets remain on edge

The economic impact of the conflict is also visible across global financial markets.

Asian equities have traded lower, while US stock markets have also fallen amid concerns that rising energy prices could fuel inflation and slow economic growth.

Bond yields in major economies have moved higher, reflecting investor uncertainty about the economic outlook.

With the conflict showing little sign of easing, markets are likely to remain volatile as investors closely monitor developments in the Middle East and the potential impact on global trade and energy supplies.

With PTI inputs