Get Free Demat Account*
U.S. - Israel - Iran War: Likely Impact on the Indian Stocks and Sectors
By Dalal Street Investment Journal (DSIJ)
Summary:
US-Iran War: Sectoral Impacts, Stock Winners & Losers, and Outlook for Indian Markets. Crude-led stress can hit OMCs (IOCL, BPCL, and HPCL), airlines (IndiGo), travel (IHCL), tyres/paints/chemicals (MRF and Asian Paints), autos (Maruti) and FMCG (HUL) via higher costs and softer demand. Relative gainers: upstream oil (ONGC, Oil India), defence (HAL, BEL) and gold plays (Titan).
Source: Dalal Street Investment Journal (DSIJ)
Around mid-Saturday (IST), February 28, 2026, the US and Israel launched an unprecedented joint military strike on Iran, especially targeting Iran’s top political & military regime (decision-makers) and also Iran’s vast stockpiles of missiles & drones and other military assets. The joint military operation by the US & Israel ─ codenamed ‘Operation Epic Fury’ (by the US) and ‘Operation Roaring Lion’ (by Israel) ─ has already eliminated Iran’s Supreme Leader Ayatollah Ali Khamenei, defence minister & military/IRGC head. Iran also launched its deadly retaliation, ‘Operation True Promise 4', within hours on February 28 ─ primarily targeting Israel and also various US military & potential intelligence bases across the Gulf region, like Bahrain, Qatar, Kuwait, the UAE/Dubai, Jordan, Iraq and Saudi Arabia, with a barrage of ballistic & hypersonic missiles and other projectiles along with suicide drones.
In brief, Iran’s retaliatory strategy may be stronger & more complex than initially assessed, creating widespread panic in the Gulf; most civilian airports & airspaces and seaports/freight paths are highly disrupted or fully closed. Moreover, the spillover effect of the killing of Khamenei is affecting not only GCC (Gulf Cooperation Council) countries but also the globe ─ almost all major US embassies & consulates are on high security alert. The US is also on high alert due to potential terrorist acts.
Moreover, although Iran may or may not officially close the Strait of Hormuz going forward, it’s already highly disrupted and virtually closed. Almost 20% of global oil & LNG and also refined oil passes through this narrow strait ─ Iran/IRGC controls the main freight line through this strait. China, India and the EU may be affected meaningfully if this Strait of Hormuz remains closed for a few days to weeks ─ the price of WTI/Brent oil and LNG/NG may skyrocket. India, China and the EU are big importers of oil & LNG.
India imports almost 85-90% of its crude oil and 50% of its LNG requirements, and out of that, almost 50% (oil) and 70% (LNG) have to pass through the Strait of Hormuz. Although India has a strategic reserve for around 60 days and also has alternative supply sources like Russia or even the US, a prolonged disruption of the Strait of Hormuz may cause Brent crude oil to hover around $88-128 (base – worst-case scenario), which may negatively affect not only India’s OMCs (oil marketing companies) and oil refiners but also the overall macroeconomy of the country (if it stays above $95-100 for a prolonged period).
In India now, almost 50% of the retail prices of Petrol & Diesel consists of various taxes by both the federal and state governments. At present, India’s retail prices for petrol & diesel are already adjusted for the Brent oil global price in the $80-90 zones, as COVID-era higher taxes & cesses are still in place. Thus, although the retail prices of petrol & diesel may not be increased in the short term until Brent Crude Oil surges sustainably above the $95-100 zone, Indian OMCs and refiners may face lower GRM (gross refining margin) if Brent Crude Oil hovers around the $80-90 zone for a long time (as they will not be permitted by the government to increase retail prices of refined products, especially petrol & diesel). Also, both federal and state governments may have to adjust some taxes & cesses for the ‘benefit of the common people’ and to save PSU OMCs' margin to some extent.
Overall, Iran's war situation is still unfolding with attacks & counterattacks, and it may accelerate further in the coming week before talks of any ceasefire and de-escalation. So far, Iranian responses have included strikes on regional US military & other zones, airspace disruptions, airport closures, and threats to maritime traffic through the Strait of Hormuz – a chokepoint handling around 20% of global oil supply. Brent Crude Oil already rallied in anticipation of an all-out Iran war from around $65 to $73 in the last few months and is set to scale $80-90 by the next few days and even to $120-130 zones by the next few weeks if Iran war tension escalates & spreads further (under base-to-worst-case scenarios).
Having said that, despite the ‘automatic partial/full closure’ of the Strait of Hormuz, Iran may not officially close the same as in that scenario, China, Iran’s biggest & most important ally, may be affected most, apart from other friendlier countries like India and even the EU. Iran may also lose its ‘victim card’ sentiment and the small wave of global ‘sympathy’ in that scenario. Also, it may be hard for Iran to maintain such an embargo on the Strait of Hormuz, not only due to military realities but also due to the fact that Iran will lose most of its oil revenue, especially from its biggest customer, China.
Anyway, in this Iran war-like risk-off environment, various asset classes may react in different ways (positive/negative):
Oil and Natural Gas (NG): Positive
Other commodities, including metals, food & fertilisers: Positive
Overall Equities: Negative (generally), but some sectors may react positively/less negatively, like upstream crude oil and NG producers and defence/military equipment producers.
Gold and silver (precious metals); USD/USTs and JGBs: Positive (safe haven flows). Gold already rallied to around $5275 late Friday from an earlier session low of $5166 in anticipation of the Iran war on the weekend.
Iran War: Potential Sectoral and Stock Impacts on Indian Markets
The primary transmission channel to Indian equities remains crude oil prices, which amplify cost pressures for importers while benefiting select producers. Higher energy costs feed into inflation, widen the current account deficit (CAD), pressure the rupee, and potentially destabilise India’s current price stability (core CPI ~3%) and postpone RBI rate cuts—creating a challenging macro backdrop. Initial market reactions are expected to be knee-jerk and broad-based, with volatility elevated and rotation towards defensives. Also, Indian goods exports to GCCs and other countries may be delayed or even cancelled (like frozen foods).
Sectors Likely to See Negative Impact (Headwinds from Elevated Crude Oil Prices and Risk Aversion)
Sectors sensitive to input/raw material costs, consumer demand, or monetary policy dynamics (rate-sensitive) face the most immediate pressure:
OMCs and Downstream Refiners: Higher crude oil prices often erode GRM (gross refining margin) unless they are able to be fully passed through, which is politically constrained in India.
OMCs like IOCL, BPCL, and HPCL are vulnerable to sharp downsides if oil prices sustain high levels. Even RIL may be affected negatively, despite its largely exporting its refined products, especially gasoline.
Aviation & Airlines: Air traffic disruptions (GCCs and potentially globally, partially) and higher ATF prices are negative for the sector
Key stocks include IndiGo and SpiceJet.
Travel & Tourism: Inbound global tourism, especially from GCCs/Gulf countries, may be affected to some extent due to airspace disruptions and also security advisories. Big hotel scripts may be affected to some extent, although domestic tourism may be supported due to precautionary measures in outbound travel.
Key hotel stocks like IHCL, EIH, Lemon Tree Hotels, Chalet Hotels, and ITC Hotels may be negatively affected in the short term.
Logistics & Transport: Fuel and operational costs rise, with sentiment hit by regional instability.
Stocks like Container Corporation and Adani Ports may face mixed pressures.
Tyres, Paints & Chemicals: Crude derivatives (byproducts) form key raw materials for tyres, paints & chemicals – they may squeeze operating margins.
Affected stocks may include MRF, Apollo Tyres, CEAT (tyres), Asian Paints and Berger Paints (paints/chemicals).
Automobiles & Ancillaries: Consistently higher fuel prices curb consumer sentiment and raise input inflation (if oil prices stay over $100 consistently in the worst-case scenario).
Major automobile stocks like Maruti Suzuki, Tata Motors, Mahindra & Mahindra, and Eicher Motors may see demand softness.
FMCG and Consumption: Inflation from higher fuel and logistics costs erodes discretionary consumer spending, hitting both top lines & bottom lines.
Stocks such as HUL, ITC, Nestlé India, and Britannia may face headwinds.
Metals: Potentially higher raw material costs (including energy) and logistics costs may negatively affect the bottom line.
Stocks like Tata Steel and JSW Steel may react negatively.
Banks & Financials: Higher inflation risks may delay potential 50 bps RBI rate cuts in 2026; lower bond yields pressure net interest margins (NIMs) and valuations (bond prices generally go higher and yields lower in heightened geopolitical tensions). But as a relatively large holder of GSEC bonds, PSBs (PSU banks) may also benefit from higher bond prices (HTM bond portfolio) to some extent.
Private banks like HDFC Bank, ICICI Bank, and Axis Bank, and also PSBs like SBI, may underperform to some extent.
Sectors Likely to See Positive Impacts (Tailwinds from Geopolitical Risks or Higher Realisations)
Certain sectors may benefit directly or relatively:
Oil & Gas Upstream/Exploration (Producers): Elevated global crude oil prices often boost top & bottom lines.
Potential beneficiaries include ONGC, Oil India, Vedanta (oil exposure), and smaller explorers like Hindustan Oil Exploration Company (HOEC).
Integrated Energy Players: Upstream strength and refining crack spreads provide resilience.
RIL often emerges as a relative outperformer due to its balanced petchem portfolio, upstream in NG
Defence (Military Equipment): Heightened Middle East tensions spur domestic orders, capex, and sentiment.
Key defence stocks: HAL, BEL, BDL and Mazagon Dock Shipbuilders.
Gold and Silver: Safe-haven demand drives prices higher, benefiting related ETFs, jewellers, or refiners
Stocks like Titan (though consumption views are mixed), Silver refiner like VEDL may gain.
Positive-Neutral/Mixed/Defensive Sectors ─ offer relative stability.
Information Technology: Potentially higher USDINR will be positive (as exporters); also, earning stability and valuation comfort after the recent AI-related disruptions may act as a potential cushion ─ defensive appeal in risk-off flows
TCS, Infosys, HCL Technologies, and Wipro may outperform.
Pharmaceuticals: Stable demand and less oil sensitivity make it defensive; also, a potentially higher USDINR may support export activities.
Sun Pharma, Dr. Reddy's, and Cipla typically weather market volatility better.
Broader market dynamics suggest initial broad selling, with Nifty potentially testing lower supports before any stabilisation. GCC parallels highlight that even oil exporters face equity pressure from risk aversion, though upstream segments may cushion losses.
The whole Iran war narrative for India centres around potentially higher oil prices in the event of direct/indirect closure of the Strait of Hormuz. But to counter that, OPEC may not hike its output quota, and that may help to stabilise the black gold to some extent, even if it works symbolically ─ most of the OPEC+ producers expect Saudi Arabia doesn’t have effective spare capacity to pump more oil in reality.
The Iran war may end sooner rather than later after Iran’s bigger-than-expected scale of retaliation. Also, Iran is not in a proper condition, either financially or militarily, to continue the war for more than 2-4 weeks at a stretch. Both the Iranian and the US presidents are now indicating de-escalation & talks over escalation & retaliation. Also, Israel’s air defence (Iron Dome) system, especially interception missiles, has a limited supply, and the US also has the same pattern (both are heavily dependent on China directly/indirectly for basic rare-earth materials required to manufacture any missile).
On Sunday, March 1, 2026, US President Trump said he will “be talking” to Iranian leaders but is vague on the timing and notes that much of the country’s leadership is dead: “They want to talk, and I have agreed to talk, so I will be talking to them. " They should have done it sooner. They should have given what was very practical and easy to do sooner. They waited too long.” Asked when talks might take place, Trump says, “I can’t tell you.”
Thus, realistically, after the next few days of attack & counterattack to satisfy each other’s domestic political compulsion, there may be signs of de-escalation rather than further escalation. Also, Trump will be under pressure to end his Iran war sooner rather than later and return to the negotiation table, as most of the US public disapproves of his Iran war policy. Along with Main Street, any steep slide in Wall Street may also keep Trump under pressure, and he may blink sooner rather than later. Also, the new Iranian regime is expected to be less of a hardliner than Khamenei, which may pave the way for a fruitful & peaceful deal between Iran and the US over nuclear issues.
Summing Up
The Iran war disruption and any further escalation may be a cyclical headwind rather than a structural tailwind; the event may be termed a 'grey/white swan', as it was largely predictable. The Iran war may not continue after 1-2 weeks. Also, India’s oil buffer and diversified source of imports (Russia/US) may help it to mitigate some shocks ─ even in the worst-case scenario. Thus Investors should not panic at all. On the contrary, any meaningful correction amid Iran's war volatility and Middle East tensions may be a wonderful opportunity to enter quality stocks with a resilient business model at a reasonable valuation amid temporary disruptions and a 'holy big discount’.
Published Date :
02 Mar 2026
Disclaimer :
Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.
The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.
Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.
BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.
Content Partner - Dalal Street Investment Journal Wealth Advisory Private Limited
This article is for educational purposes only and should not be considered investment advice. Market investments are subject to risks. DSIJ Wealth Advisory Private Limited is a SEBI-registered Research Analyst (Reg. No: INH000006396) and Investment Adviser (Reg. No: INA000001142). Please consult your financial adviser before investing.
For more disclaimer, check here : https://www.bajajbroking.in/disclaimer
Read More Blogs
Our Secure Trading Platforms
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading
Products
Calculators
Mutual Funds & SIP
Important Links
Corporate
Popular Stocks
Indian Indices
Global Indices
Sector Wise Stocks
