The Indian stock market experienced a significant downturn on Monday, June 23, 2025, with the Sensex crashing 700 points and the Nifty 50 nearing the 24,900 mark. This decline is attributed to a combination of factors, primarily stemming from the escalating tensions in the Middle East following the US attack on Iranian nuclear facilities.

Geopolitical Tensions The primary trigger for the market fall is the heightened geopolitical risk arising from the US military action in Iran. On Sunday, June 22, 2025, the United States bombed three nuclear sites in Iran – Fordow, Natanz, and Isfahan – in response to recent escalations in the West Asia war. This move, siding with Israel, has led to increased uncertainty and fears of a broader regional conflict.

Iran has vowed to retaliate, warning of "dire consequences" and reportedly considering the closure of the Strait of Hormuz, a critical route for global oil supplies. Such actions could further destabilize the region and have significant economic repercussions. Investors are closely monitoring Iran's response, as any further escalation could lead to a more substantial market downturn. The US President has also warned Iran that any retaliation would be met with a response "far greater" than what was witnessed.

Impact on Oil Prices The escalating conflict has already led to a spike in crude oil prices, reaching a five-month high. Brent crude futures had already increased over the past weeks and this action is expected to add fuel to the rally, particularly if Iran retaliates or moves to block the Strait of Hormuz. Closure of the Strait of Hormuz could trigger a significant price spike, as nearly 20% of global oil flows through this vital choke point.

For India, a surge in oil prices is particularly problematic. The country relies heavily on imports for its energy needs, with over 90% of its crude oil and 54% of its LNG being imported. Rising oil prices could lead to increased inflation and a rise in the fiscal deficit, negatively impacting corporate earnings growth due to higher input costs.

Broader Market Concerns Besides geopolitical tensions and rising oil prices, several other factors are contributing to the Indian stock market's decline. These include:

• Weak Global Cues: World equities have generally declined due to a mix of soft US inflation data, lingering tariff concerns, and fragile geopolitical dynamics, adding pressure on Indian markets.
• FII Outflows: Foreign institutional investors (FIIs) are likely to remain cautious and sensitive to geopolitical risks, potentially leading to continued outflows from Indian equities.
• Technical Indicators: Technical analysis suggests that the Nifty 50 is expected to find support between 25,000 and 24,950, but further declines are possible if tensions escalate.

Sectoral Impact The market downturn has affected various sectors, with IT, auto, telecom, and tech stocks suffering the most significant losses. The Nifty IT index, Nifty Auto index, Nifty Private Bank index, and Nifty FMCG all experienced declines. However, defense stocks have shown resilience, with the Nifty India Defence index trading higher as investors anticipate increased defense spending amid the ongoing conflict.

Expert Opinions Market experts suggest that the US economy and global markets were unprepared for this sudden conflict, which could weigh heavily on overall investor sentiment across global stock markets. It is crucial for investors to closely monitor developments in the Middle East and the movement of oil prices to gauge the near-term direction of the Indian stock market.