Indian equity benchmarks ended sharply lower after comments by US President Donald Trump at the NATO summit fuelled fresh geopolitical concerns, triggering widespread risk aversion across global financial markets and accelerating selling pressure during the final hour of trade.
The benchmark NIFTY 50 slumped more than 500 points, or over 2 per cent, to close at 23,887.45, while the BSE SENSEX fell 1,677 points, or around 2 per cent, to settle at 76,555. Broader markets also witnessed heavy selling, with the Nifty Financial Services and Nifty PSU Bank indices emerging among the worst-hit sectors. Meanwhile, India VIX surged more than 28 per cent, indicating a sharp rise in market volatility and investor anxiety.
The market sell-off gathered pace after Trump, speaking at the NATO summit in Ankara, said, "We attacked very powerfully last night against Iran. Iran shot rockets at ships, that's why US hit back." He further stated, "Iran doesn't know what it's doing, they are incompetent," and added, "We wasted a lot of time with Iran," remarks that heightened fears of renewed military escalation in West Asia.
Trump also made a series of comments on trade and defence, saying, "Not happy with NATO regarding Greenland," while criticising Spain by remarking, "Spain is a wasted cause, don't want to do trade," and adding that he wanted to "cut off all trade with Spain." He further claimed, "Greenland is a big problem," and said, "We pay far too much into NATO."
Market participants said the remarks reignited concerns over a prolonged geopolitical conflict, prompting investors to move away from risk assets. The uncertainty also pushed Brent crude prices nearly 4 per cent higher to USD 76.71 per barrel, adding further pressure on equity markets, particularly in oil-importing countries such as India.
Market and banking expert Ajay Bagga said the sudden breakdown of the Memorandum of Understanding (MoU) between the United States and Iran had triggered a fresh wave of risk-off sentiment across global markets, with Indian equities bearing the brunt of the sell-off.
"The sudden collapse of the Memorandum of Understanding (MoU) between the US and Iran has triggered a sharp wave of risk-off sentiment across global financial markets, hitting Indian equities particularly hard," Bagga said.
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He noted that Trump's declaration that the peace process was "over" had reintroduced significant geopolitical uncertainty around the strategically important Strait of Hormuz.
"With crude oil prices surging rapidly on renewed supply and security fears, India—as a major energy importer—faces a double whammy of imported inflation and fiscal pressure," he said.
Bagga added that investors responded by aggressively reducing exposure to equities as geopolitical risks intensified. "Investors are aggressively shedding risk, leading to the sharp sell-off on Dalal Street today as the global market landscape rapidly recalibrates for a prolonged, volatile standoff in West Asia," he said. Despite the market reaction, Bagga said there was still hope that tensions could ease through diplomacy, although investors were quickly pricing in the possibility of further escalation.
"We still believe this is posturing from both sides to cater to their domestic compulsions, but the risk of escalation remains on the table and markets are pricing it in a hurry. Hopefully, the regional powers will prevail upon both the US and Iran to return to the negotiation table," he added.
Bagga said market volatility is likely to remain elevated in the near term as investors closely monitor geopolitical developments and crude oil prices for signs of de-escalation.
At the time of filing, the US Dollar Index was up 0.10 per cent at 101.1300, while the Indian rupee appreciated 0.62 per cent to trade at 95.5600 against the US dollar.
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